Movements in total quantity and in quality-adjusted price suggest a supply-side shock in the American automobile market in 1955. This paper tests the hypothesis that the shock was a transitory change in industry conduct, a price war. The key ingredients of the test are alternative equilibrium models of oligopoly under product differentiation. In nonnested (Cox) tests of hypotheses, a collusive solution is sustained in 1954 and in 1956, while a competitive solution holds in 1955. The result does not appear to be an artifact, since it is robust in tests against alternative specifications. Copyright 1987 by Blackwell Publishing Ltd.
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Bodnar, Gordon M. & Dumas, Bernard & Marston, Richard C., 2000.
"Pass-through and Exposure,"
Working Papers
00-4, University of Pennsylvania, Wharton School, Weiss Center.
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