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Information Sharing and Competition in the Motor Vehicle Industry

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  • Maura P. Doyle
  • Christopher M. Snyder

Abstract

Up to six months ahead of actual production, U.S. automakers announce plans for their monthly domestic production of cars. A leading industry trade journal publishes the initial plan and then a series of revisions leading up to the month in question. We analyze a panel data set spanning the years 1965--1995, matching the production forecasts with data for actual monthly production. We show that a firm's plan announcement affects competitors' later revisions of their own plans and eventual production. The interaction appears to be complementary---large plans or upward revisions cause competitors to revise plans upward and increase production. The results are consistent with models in which firms share information about common demand parameters.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 107 (1999)
Issue (Month): 6 (December)
Pages: 1326-1364

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Handle: RePEc:ucp:jpolec:v:107:y:1999:i:6:p:1326-1364

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  1. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  2. Edward J Green & Robert H Porter, 1997. "Noncooperative Collusion Under Imperfect Price Information," Levine's Working Paper Archive 1147, David K. Levine.
  3. Timothy F. Bresnahan & Valerie A. Ramey, 1992. "Output Fluctuations at the Plant Level," NBER Working Papers 4105, National Bureau of Economic Research, Inc.
  4. Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
  5. Porter, Robert H., 1983. "Optimal cartel trigger price strategies," Journal of Economic Theory, Elsevier, vol. 29(2), pages 313-338, April.
  6. Spencer Krane & David Reifschneider, 1987. "The forecasting accuracy of auto assembly schedules," Special Studies Papers 216, Board of Governors of the Federal Reserve System (U.S.).
  7. Grether, David M & Plott, Charles R, 1984. "The Effects of Market Practices in Oligopolistic Markets: An Experimental Examination of the Ethyl Case," Economic Inquiry, Western Economic Association International, vol. 22(4), pages 479-507, October.
  8. Cason, T.N., 1992. "The Impact of Information Sharing Opportunities on Market Outcomes: An Experimental Study," Papers 9303, Southern California - Department of Economics.
  9. Kahn, James A, 1992. "Why Is Production More Volatile Than Sales? Theory and Evidence on the Stockout-Avoidance Motive for Inventory-Holding," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 481-510, May.
  10. Glenn Ellison, 1994. "Theories of Cartel Stability and the Joint Executive Committee," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 37-57, Spring.
  11. Ernst R. Berndt & Ann F. Friedlaender & Judy Shaw-Er Wang Chiang, 1990. "Interdependent Pricing and Markup Behavior: An Empirical Analysis of GM, Ford and Chrysler," NBER Working Papers 3396, National Bureau of Economic Research, Inc.
  12. Richard N. Clarke, 1983. "Collusion and the Incentives for Information Sharing," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 383-394, Autumn.
  13. Shapiro, Carl, 1986. "Exchange of Cost Information in Oligopoly," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 433-46, July.
  14. Alison J. Kirby, 1988. "Trade Associations as Information Exchange Mechanisms," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 138-146, Spring.
  15. Amir Ziv, 1993. "Information Sharing in Oligopoly: The Truth-Telling Problem," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 455-465, Autumn.
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Citations

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Cited by:
  1. Guillermo Caruana & Liran Einav, 2006. "Production Targets," Working Papers wp2006_0602, CEMFI.
  2. Darren Filson, 2003. "Dynamic Common Agency, Vertical Integration, and Investment: The Economics of Movie Distribution," Claremont Colleges Working Papers 2003-07, Claremont Colleges.
  3. Creane, Anthony, 2007. "Productivity information in vertical sharing agreements," International Journal of Industrial Organization, Elsevier, vol. 25(4), pages 821-841, August.
  4. Novshek, William & Thoman, Lynda, 1998. "Information disaggregation and incentives for non-collusive information sharing," Economics Letters, Elsevier, vol. 61(3), pages 327-332, December.
  5. Joseph E. Harrington, Jr & Roberto Hernan-Gonzalez & Praveen Kujal, 2013. "The Relative Efficacy of Price Announcements and Express Communication for Collusion: Experimental Findings," Working Papers 13-30, Chapman University, Economic Science Institute.
  6. Ana Aizcorbe & Martha Starr & James T. Hickman, 2003. "The replacement demand for motor vehicles: evidence from the Survey of Consumer Finances," Finance and Economics Discussion Series 2003-44, Board of Governors of the Federal Reserve System (U.S.).
  7. Dimitrova, Magdalena & Schlee, Edward E., 2003. "Monopoly, competition and information acquisition," International Journal of Industrial Organization, Elsevier, vol. 21(10), pages 1623-1642, December.
  8. Olivier Armantier, Oliver Richard, 2001. "Entry and Exchanges of Cost Information," Department of Economics Working Papers 01-06, Stony Brook University, Department of Economics.
  9. Corona, Carlos & Nan, Lin, 2013. "Preannouncing competitive decisions in oligopoly markets," Journal of Accounting and Economics, Elsevier, vol. 56(1), pages 73-90.
  10. Chang, Chun-Hao & Prakash, Arun J. & Yeh, Shu, 2004. "Sale of monopoly information and behavior of rivaling clients: A theoretical perspective," Review of Financial Economics, Elsevier, vol. 13(3), pages 283-304.
  11. Paolo Coccorese, 2010. "Information Exchange as a Means of Collusion: The Case of the Italian Car Insurance Market," Journal of Industry, Competition and Trade, Springer, vol. 10(1), pages 55-70, March.
  12. Genesove, David & Mullin, Wallace P, 2001. "Rules, Communication and Collusion: Narrative Evidence from the Sugar Institute Case," CEPR Discussion Papers 2739, C.E.P.R. Discussion Papers.
  13. Geng, Wei & Qiu, Minmin & Zhao, Xiaobo, 2010. "An inventory system with single distributor and multiple retailers: Operating scenarios and performance comparison," International Journal of Production Economics, Elsevier, vol. 128(1), pages 434-444, November.
  14. Cooper, James C. & Wright, Joshua D., 2012. "Alcohol, antitrust, and the 21st Amendment: An empirical examination of post and hold laws," International Review of Law and Economics, Elsevier, vol. 32(4), pages 379-392.
  15. Kai Uwe Kühn & John Van Reenen, 2008. "Capacity Constraints and Irreversible Investments: Defending Against Collective Dominance in UPM Kymmene/Norske Skog/Haindl," CEP Special Papers 19, Centre for Economic Performance, LSE.
  16. Liran Einav & S. Ravid, 2009. "Stock market response to changes in movies’ opening dates," Journal of Cultural Economics, Springer, vol. 33(4), pages 311-319, November.
  17. Ronald Harstad & Stephen Martin & Hans-Theo Normann, 1997. "Experimental Tests of Consciously Parallel Behaviour in Oligopoly," CIE Discussion Papers 1997-07, University of Copenhagen. Department of Economics. Centre for Industrial Economics.

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