Identifying behaviour in a multiproduct oligopoly: Incumbents reaction to tariffs dismantling

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Identifying behaviour in a multiproduct oligopoly: Incumbents reaction to tariffs dismantling

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Jaumandreu, Jordi
Moral, Maria Jose

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Abstract

The Spanish automobile market of the nineties experienced a perfectly foreseeable tariﬀ dismantling and a strong demand downturn, with the observed result of an apparently sharpened producer competition in products and perhaps in prices. This paper is aimed at testing whether or not there really was a change in pricing behaviour, using a structural model of competition. To answer that question, we specify, estimate and test semiparametric pricing equations with panel data for 164 models belonging to the 31 firms which competed in the market. The specification includes several equilibriums as alternative estimating models, considering prominently tacit coalitions by which a group of firms sets prices, taking into account the cross eﬀects on their demands. The statistical test selects as the best model given the data an unbroken coalition of domestic and European producers. Comparative results using tight demand side specifications show that an inadequate specification of the demand side may induce wrong inferences.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1248.

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Date of creation: 2006
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Handle: RePEc:pra:mprapa:1248

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Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-01-14 (All new papers)
NEP-COM-2007-01-14 (Industrial Competition)
NEP-MIC-2007-01-14 (Microeconomics)

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repec:cup:etheor:v:10:y:1994:i:1:p:1-28 is not listed on IDEAS

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