How do primary and secondary markets interact? We propose a structural model of car choice by forward-looking consumers that features endogenous price equilibrium for both new and used cars. We estimate the model using Danish register data and conduct two counterfactual exercises to study how the primary and secondary markets interact: First, we simulate the effects of rising marginal costs and second, a hypothetical merger between the two largest car manufacturers. We derive two main findings: First, we show that an active secondary market in equilibrium leads to more market power since firms internalize that secondary market prices respond to prices in the primary market. Therefore, by not explicitly modeling the secondary market in durable goods industries, researchers would be led to underestimate market power and for example the competitive harm from mergers. Second, we characterize how a dynamic model allows for substantially more flexible substitution patterns than a static model.

Demand estimation is a cornerstone of economics, guiding firms’ optimal decisions and enabling researchers to assess the social welfare effects of public policies. In this study, we estimate demand elasticities and simulate counterfactual outcomes in Denmark’s new car market using three competing discrete choice models based on market share data: the multinomial logit (MNL), the random coefficient logit (RCL), and the recently proposed inverse product differentiation logit (IPDL) model. Our comparison reveals that the IPDL model produces substantially different substitution patterns from those estimated by MNL and RCL, though it aligns more closely with the latter. Notably, IPDL captures differentiation along discrete segmentation variables that RCL does not fully account for. We then apply these models to evaluate a major reform of Denmark’s new car taxation system, demonstrating that differences in substitution patterns lead to significantly divergent counterfactual predictions. Lastly, we highlight the computational advantages of IPDL over RCL and nested logit models. Overall, our findings suggest that IPDL is a valuable tool for researchers and practitioners studying demand for differentiated products.

This paper examines how productivity and overall performance of exporters are affected when they start supplying a foreign “superstar firm”. Using comprehensive register data on firm-to-firm trade between Denmark and Sweden and a dynamic event study design, we find that suppliers that begin exporting to a superstar firm experience a 4.6% increase in employment and a 7.3% rise in total factor productivity. Our analysis further reveals that these effects are not merely the result of acquiring a new large trading partner but are specifically tied to the characteristics of superstar firms. We validate our findings through robustness checks, including placebo tests, which confirm that firms gaining non-superstar buyers do not exhibit similar productivity gains. These insights contribute to the broader literature on international trade and firm productivity, demonstrating how buyer-supplier linkages drive productivity spillovers and knowledge diffusion across borders.