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The Convergence of Automobile Prices in the European Union: an Empirical Analysis for the Period 1993-1999

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Author Info
Guillaume Gaulier
Severine Haller

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Abstract

Over the last decade, the EC automobile market has been the scene of significant price differentials for the same vehicle across the member states. The move towards a more integrated internal market, since January 1993, obviously calls for more up-to-date empirical information. We provide an analysis of price convergence over the period 1993-1999 for EU countries. Car characteristics were collected to build aggregate prices for countries thanks to a quasi-hedonic econometric model. Price dynamic is analyzed through Sigma and Beta convergence. We found that Sigma convergence is impeded by exchange rates fluctuations, while there is a strong force driving Beta convergence. The Euro should then favor convergence.

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Paper provided by CEPII research center in its series Working Papers with number 2000-14.

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Date of creation: Nov 2000
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Handle: RePEc:cii:cepidt:2000-14

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Related research
Keywords: Automobile; european integration; panel data; price convergence;

Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment

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This item is featured on the following reading lists:
  1. Studies on the automobile industry
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  1. Bartik, Timothy J, 1987. "The Estimation of Demand Parameters in Hedonic Price Models," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 81-88, February. [Downloadable!] (restricted)
  2. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb.. [Downloadable!] (restricted)
  3. Danzon, Patricia M. & Chao, Li-Wei, 2000. "Cross-national price differences for pharmaceuticals: how large, and why?," Journal of Health Economics, Elsevier, vol. 19(2), pages 159-195, March. [Downloadable!] (restricted)
  4. Anderson, Simon P & Ginsburgh, Victor A, 1999. "International Pricing with Costly Consumer Arbitrage," Review of International Economics, Blackwell Publishing, vol. 7(1), pages 126-39, February.
  5. Mertens, Yves & Ginsburgh, Victor, 1985. "Product Differentiation and Price Discrimination in the European Community: The Case of Automobiles," Journal of Industrial Economics, Blackwell Publishing, vol. 34(2), pages 151-66, December. [Downloadable!] (restricted)
  6. Victor Ginsburgh & Geneviève Vanhamme, 1989. "Price Differences in the EC Car Market. Some Further Results," Annales d'Economie et de Statistique, ADRES, issue 15-16, pages 07, Juillet-D. [Downloadable!]
  7. Georges Bresson & Claude Mathieu, 1992. "Différenciation horizontale et verticale des produits : Une application à l'industrie automobile," Annales d'Economie et de Statistique, ADRES, issue 27, pages 05, Juillet-S. [Downloadable!]
  8. Goldberg, Pinelopi Koujianou & Verboven, Frank, 1998. "The Evolution of Price Dispersion in the European Car Market," CEPR Discussion Papers 2029, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer. [Downloadable!] (restricted)
  10. Kirman, Alan & Schueller, Nathalie, 1990. "Price Leadership and Discrimination in the European Car Market," Journal of Industrial Economics, Blackwell Publishing, vol. 39(1), pages 69-91, September. [Downloadable!] (restricted)
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