The award funds two different projects that investigate the effects of secondary markets on several dimensions of economic activity. An example of a secondary market is the market for used automobiles; this is 'secondary' to the primary market for new automobiles.
The first project develops and analyzes a new mathematical model of a durable goods market. This model highlights the role of a nation's overall income distribution in determining whether or not secondary markets are important to the national economy.
The second project calibrates the model using data from the United States, the United Kingdom, France, and other countries. The calibrated models are then analyzed to examine the effects of reduced transaction costs on both secondary markets and the cyclical behavior of the overall economy in each country.
This research extends our understanding of secondary markets and how these markets affect macroeconomic stability in different countries.
