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Costs, Technology and Productivity in the U. S. Automobile Industry

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  • A. F. Friedlaender
  • C. Winston
  • D. K. Wang

Abstract

This article analyzes the structure of costs, technology, and productivity in the U.S. automobile industry by estimating a general hedonic joint cost function for domestic automotive production for the Big Three American automobile producers: General Motors, Ford, and Chrysler. In general it is found that costs are highly sensitive to the scale and composition of output, with General Motors and Chrysler experiencing an output configuration that exhibits increasing returns to scale and economies of joint production. On the other hand, Chrysler's recent productivity growth is found to be far below that of General Motors. Although Ford's cost structure is not so advantageous as General Motors', its recent productivity growth suggests that it can remain an effective competitor in the domestic automotive market.
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Suggested Citation

  • A. F. Friedlaender & C. Winston & D. K. Wang, 1982. "Costs, Technology and Productivity in the U. S. Automobile Industry," Working papers 294, Massachusetts Institute of Technology (MIT), Department of Economics.
  • Handle: RePEc:mit:worpap:294
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    Cited by:

    1. Hans-Theo Normann & Bradley J. Ruffle & Christopher M. Snyder, 2007. "Do buyer-size discounts depend on the curvature of the surplus function? Experimental tests of bargaining models," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 747-767, September.
    2. Iseki, Hiroyuki, 2008. "Economies of scale in bus transit service in the USA: How does cost efficiency vary by agency size and level of contracting?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(8), pages 1086-1097, October.
    3. Li, Hong-Zhou & Kopsakangas-Savolainen, Maria & Xiao, Xing-Zhi & Tian, Zhen-Zhen & Yang, Xiao-Yuan & Wang, Jian-Lin, 2016. "Cost efficiency of electric grid utilities in China: A comparison of estimates from SFA–MLE, SFA–Bayes and StoNED–CNLS," Energy Economics, Elsevier, vol. 55(C), pages 272-283.
    4. repec:eee:enepol:v:108:y:2017:i:c:p:606-616 is not listed on IDEAS
    5. Tsekouras, K. D. & Zagouras, N. G., 1998. "A cost function of Greek non-ferrous metal industry," International Journal of Production Economics, Elsevier, vol. 56(1), pages 621-640, September.
    6. Amir, Rabah & De Castro, Luciano & Koutsougeras, Leonidas, 2014. "Free entry versus socially optimal entry," Journal of Economic Theory, Elsevier, vol. 154(C), pages 112-125.
    7. Li, Hong-Zhou & Tian, Xian-Liang & Zou, Tao, 2015. "Impact analysis of coal-electricity pricing linkage scheme in China based on stochastic frontier cost function," Applied Energy, Elsevier, vol. 151(C), pages 296-305.
    8. Azzeddine M. Azzam, 1998. "Testing for Vertical Economies of Scope: An Example from US Pig Production," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(3), pages 427-433.

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