Third party evaluations and resale prices in the US used vehicle market

This paper examines the impact upon used vehicle resale prices in the USA from the annual reliability evaluations done by Consumer Reports magazine. In contrast to prior work finding no announcement effects upon prices from the evaluations, this study finds significant announcement effects. Vehicles in the subcompact/compact category experience an increase in their annual rate of depreciation relative to comparable vehicles following a negative evaluation by Consumer Reports. These results are consistent with the behaviour of rational consumers operating in a market with asymmetric information problems.