The Price of Owning a Car : An Analysis of Auction Quota Premium in Singapore

Faced with dilemmas parallel to countries besieged by road congestions and limited land resources, Singapore has chosen to adapt a Vehicle Quota System (VQS) whereby car owners are required to bid for a licence in an auction before their vehicles are allowed onto the road. In this paper, we examine the behaviour of VQS auction prices using a structural time series approach. For outliers that are not observable from innovations, we use auxiliary residuals with dummy variables to supplement the analysis. In general, we find that prices exhibit a fairly constant seasonal pattern. The inclusion of monthly VQS quotas released by the transport regulatory body and the national stock market index is not useful in explaining the observed price behaviour. Interestingly, a basic structural model with stochastic components seems to fit the data best