This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Interdependent Pricing and Markup Behavior: An Empirical Analysis of GM, Ford and Chrysler

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Ernst R. Berndt
Ann F. Friedlaender
Judy Shaw-Er Wang Chiang
Abstract

Our purpose in this paper is to develop and estimate a model of the US automobile industry that can be used to analyze the secular and cyclical strategic markup behavior and market structure of its three major domestic producers - - GM, Ford and Chrysler. The principal novelty in this paper is not such much in the underlying theory (we build on what Timothy Bresnahan has called the "new empirical industrial organization" literature), but rather in the actual empirical implementation of a multi-equation model sufficiently general to permit the testing of a variety of specific behavioral postulates associated with the interdependent strategic profit-maximizing behavior of GM, Ford and Chrysler. Using firm-specific annual data from 1959-83, we find that at usual levels of statistical significance, we cannot reject Cournot quantity-setting behavior, nor can we reject leader/follower quantity-setting behavior with GM as leader and Ford and Chrysler as followers; the parameter restrictions associated with leader/follower behavior are slightly more binding than those with Cournot, although the difference is not decisive. In terms of the cyclical analysis of market behavior, our most striking result is the great diversity of behavior we find among GM, Ford and Chrysler. Depending on which firm is being analyzed, there is support for the pro-cyclical "conventional wisdom" of markups (GM and Ford), as well as for the counter-cyclical "revisionist" literature (Chrysler). Diversity, rather than constancy and homogeneity, best characterizes firms in this industry.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w3396.pdf
File Format: application/pdf
File Function:
Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3396.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: Jun 1990
Date of revision:
Handle: RePEc:nbr:nberwo:3396

Note: PR
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords:

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ian Domowitz & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Market Structure and Cyclical Fluctuations in U.S. Manufacturing," NBER Working Papers 2115, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Robert E. Hall, 1987. "Market Structures and Macroeconomic Fluctuations," NBER Reprints 0845, National Bureau of Economic Research, Inc.
  3. Robert E. Hall, 1986. "Market Structure and Macroeconomic Fluctuations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(1986-2), pages 285-338. [Downloadable!]
  4. Ann F. Friedlaender & Clifford Winston & Kung Wang, 1983. "Costs, Technology, and Productivity in the U.S. Automobile Industry," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 1-20, Spring. [Downloadable!] (restricted)
    Other versions:
  5. Appelbaum, Elie, 1982. "The estimation of the degree of oligopoly power," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 287-299, August. [Downloadable!] (restricted)
  6. Iwata, Gyoichi, 1974. "Measurement of Conjectural Variations in Oligopoly," Econometrica, Econometric Society, vol. 42(5), pages 947-66, September. [Downloadable!] (restricted)
  7. Appelbaum, Elie, 1979. "Testing price taking behavior," Journal of Econometrics, Elsevier, vol. 9(3), pages 283-294, February. [Downloadable!] (restricted)
  8. Catherine J. Morrison, 1990. "Market Power, Economic Profitability and Productivity Growth Measurement: An Integrated Structural Approach," NBER Working Papers 3355, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January. [Downloadable!] (restricted)
    Other versions:
  10. Kwoka, John E, Jr, 1984. "Market Power and Market Change in the U.S. Automobile Industry," Journal of Industrial Economics, Blackwell Publishing, vol. 32(4), pages 509-22, June. [Downloadable!] (restricted)
  11. Mark Bils, 1989. "Cyclical Pricing of Durable Goods," NBER Working Papers 3050, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Lee, Lung-Fei & Porter, Robert H, 1984. "Switching Regression Models with Imperfect Sample Separation Information-With an Application on Cartel Stability," Econometrica, Econometric Society, vol. 52(2), pages 391-418, March. [Downloadable!] (restricted)
  13. Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter. [Downloadable!] (restricted)
  14. Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-86, September. [Downloadable!] (restricted)
  15. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Maura P. Doyle & Christopher M. Snyder, 1997. "Information sharing and competition in the motor vehicle industry," Finance and Economics Discussion Series 1997-4, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  2. Guillermo Caruana & Liran Einav, 2006. "Production Targets," NBER Working Papers 11958, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
Statistics
Access and download statistics

Did you know? RePEc also has a blog.

This page was last updated on 2008-10-9.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.