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The Economic Effects of Automobile Dealer Regulation

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  • Frank Mathewson
  • Ralph Winter

Abstract

Since the US Dealer Day in Court Legislation of 1956, many states have altered the nature of written contracts between automobile manufacturers and their dealers. In particular, restrictions have been placed on the manufacturers' rights to add new dealers to market areas of existing dealers and to terminate dealers. Are these laws efficient in the sense that they complete otherwise incomplete contracts (the public interest hypothesis)? Or are these laws inefficient in that they bestow benefits on existing dealers at the expense of consumers and manufacturers (the private interest hypothesis)? We develop a model of the incentive and effects of this intervention that encompasses both hypotheses and offers distinguishing empirical implications.

Suggested Citation

  • Frank Mathewson & Ralph Winter, 1989. "The Economic Effects of Automobile Dealer Regulation," Annals of Economics and Statistics, GENES, issue 15-16, pages 409-426.
  • Handle: RePEc:adr:anecst:y:1989:i:15-16:p:409-426
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