f the used car is half the price of the new one, it would need something close to a 50% chance of being completely worthless for defect risk to justify the price difference.
No, it would not. Part of the price difference is just depreciation; the car isn't going to last as long, will need repairs sooner, etc. simply because it is older, and older cars are like that. The further price difference on top of that is the price difference that actually needs to be explained by the increased risk.
I think you've misunderstood me; my apologies for not being clearer and more explicit. I'll try to fix that below.
The question I was trying to address was: How much of the explanation can defect risk be? And my answer was: Not much more than the expected cost of the defects, which in turn is probably rather less than Pr(serious defects) * value of car without defects, which for not-very-old cars is empirically quite a small fraction of the cost of the new car.
(The "used price = new price / 2" case was just an example.)
Since the difference between...
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