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The Evolution of Market Power in the US Auto Industry

Author

Listed:
  • Paul L. E. Grieco
  • Charles Murry
  • Ali Yurukoglu

Abstract

We construct measures of industry performance and welfare in the U.S. car and light truck market from 1980-2018. We estimate a differentiated products demand model for this market using product level data on market shares, prices, and product characteristics, and consumer level data on demographics, purchases, and stated second choices. We estimate marginal costs under the conduct assumption of Nash-Bertrand pricing. We relate trends in consumer welfare and markups to industry trends in market structure and the composition of products, like the rise of import competition, the proliferation of SUV's, and changes in vehicle characteristics. We find that although prices rose over time, concentration and market power decreased substantially. Consumer welfare increased over time due to improving product quality and falling marginal costs. The fraction of total surplus accruing to consumers also increased.

Suggested Citation

  • Paul L. E. Grieco & Charles Murry & Ali Yurukoglu, 2021. "The Evolution of Market Power in the US Auto Industry," NBER Working Papers 29013, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29013
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    Cited by:

    1. Montag, Felix, 2023. "Mergers, foreign competition, and jobs: Evidence from the U.S. appliance industry," Working Papers 326, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    2. Enghin Atalay & Erika Frost & Alan T. Sorensen & Christopher J. Sullivan & Wanjia Zhu, 2023. "Scalable Demand and Markups," NBER Working Papers 31230, National Bureau of Economic Research, Inc.
    3. Romeo-Victor Ionescu & Monica-Laura Zlati & Valentin-Marian Antohi & Marius-Sorin Dincă, 2022. "Automotive Sector Financial Performance Dynamic Model: Europe vs. Asia Case Study," Mathematics, MDPI, vol. 10(19), pages 1-21, October.

    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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