IDEAS home Printed from https://ideas.repec.org/p/tex/carewp/9607.html
   My bibliography  Save this paper

The Effect of the Arab Boycott on Israel: The Automobile Market

Author

Listed:
  • Chaim Fershtman

    (CCSG, U. of Tel Aviv)

  • Neil Gandal

    (Eco, U. of Texas and Tel Aviv)

Abstract

Recent progress towards a comprehensive peace in the Middle East has led to a relaxation of the enforcement of the Arab economic boycott of Israel. This in turn has led to the entry of all the major Japanese and Korean automobile manufacturers into the Israeli market. In this paper, we examine the effect of the Arab economic boycott on this market. Using recent advances in estimating discrete-choice models of product differentiation, we estimate that had the boycott continued, the welfare loss per purchaser would have been approximately \$790 in 1994. This benefit can be interpreted as a {\em peace dividend}. Since approximately 113,000 new automobiles were sold in 1994, the welfare gain to consumers was more than \$89 million that year.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Chaim Fershtman & Neil Gandal, 1996. "The Effect of the Arab Boycott on Israel: The Automobile Market," CARE Working Papers 9607, The University of Texas at Austin, Center for Applied Research in Economics.
  • Handle: RePEc:tex:carewp:9607
    Note: None
    as

    Download full text from publisher

    File URL: http://www.eco.utexas.edu/Ecopapers/wp9607.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Anderson, Simon P & de Palma, Andre, 1992. "Multiproduct Firms: A Nested Logit Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 40(3), pages 261-276, September.
    2. Shane M. Greenstein, 1996. "From Superminis to Supercomputers: Estimating Surplus in the Computing Market," NBER Chapters, in: The Economics of New Goods, pages 329-372, National Bureau of Economic Research, Inc.
    3. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
    4. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
    5. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
    6. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    7. Trajtenberg, Manuel, 1989. "The Welfare Analysis of Product Innovations, with an Application to Computed Tomography Scanners," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 444-479, April.
    8. Gary Clyde Hufbauer & Jeffrey J. Schott & Kimberly Ann Elliott, 2009. "Economic Sanctions Reconsidered, 3rd Edition (paper)," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 4129, January.
    9. Gary Clyde Hufbauer & Jeffrey J. Schott & Kimberly Ann Elliott, 1990. "Economic Sanctions Reconsidered: 2nd Edition," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 82, January.
    10. Reingold, Ruth N. & Lansing, Paul, 1994. "An Ethical Analysis of Japan’s Response to the Arab Boycott of Israel," Business Ethics Quarterly, Cambridge University Press, vol. 4(3), pages 335-353, July.
    11. Bresnahan, Timothy F, 1987. "Competition and Collusion in the American Automobile Industry: The 1955 Price War," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 457-482, June.
    12. Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-1286, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tovar, Jorge, 2012. "Consumers’ Welfare and Trade Liberalization: Evidence from the Car Industry in Colombia," World Development, Elsevier, vol. 40(4), pages 808-820.
    2. Pereira, Pedro & Ribeiro, Tiago, 2011. "The impact on broadband access to the Internet of the dual ownership of telephone and cable networks," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 283-293, March.
    3. Federico Ciliberto & GianCarlo Moschini & Edward D. Perry, 2019. "Valuing product innovation: genetically engineered varieties in US corn and soybeans," RAND Journal of Economics, RAND Corporation, vol. 50(3), pages 615-644, September.
    4. Pereira, Pedro & Ribeiro, Tiago & Vareda, João, 2013. "Delineating markets for bundles with consumer level data: The case of triple-play," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 760-773.
    5. Leheyda, Nina, 2008. "Market Power, Multimarket Contact and Pricing: Some Evidence from the US Automobile Market," ZEW Discussion Papers 08-118, ZEW - Leibniz Centre for European Economic Research.
    6. Brito, Duarte & Pereira, Pedro & Ramalho, Joaquim J.S., 2013. "Mergers, coordinated effects and efficiency in the Portuguese non-life insurance industry," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 554-568.
    7. Mariuzzo, Franco & Walsh, Patrick Paul & van Parys, Olivier, 2009. "Estimating the Price Overcharge from Cartelisation of the Irish Automobile Industry," The Economic and Social Review, Economic and Social Studies, vol. 40(2), pages 165-182.
    8. Aamir Rafique Hashmi & Johannes Van Biesebroeck, 2016. "The Relationship between Market Structure and Innovation in Industry Equilibrium: A Case Study of the Global Automobile Industry," The Review of Economics and Statistics, MIT Press, vol. 98(1), pages 192-208, March.
    9. Céline Bonnet & Pierre Dubois, 2010. "Inference on vertical contracts between manufacturers and retailers allowing for nonlinear pricing and resale price maintenance," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 139-164, March.
    10. Rebecca Hellerstein & Sofia Berto Villas-Boas, 2006. "Arm's-length transactions as a source of incomplete cross-border transmission: the case of autos," Staff Reports 251, Federal Reserve Bank of New York.
    11. Jan De Loecker & Johannes Van Biesebroeck, 2016. "Effect of International Competition on Firm Productivity and Market Power," NBER Working Papers 21994, National Bureau of Economic Research, Inc.
    12. Johannes Van Biesebroeck & Aamir Hashmi, 2007. "Market Structure and Innovation: A Dynamic Analysis of the Global Automobile Industry," 2007 Meeting Papers 362, Society for Economic Dynamics.
    13. Rebecca Hellerstein, 2005. "A Decomposition of the Sources of Incomplete Cross-Border Transmission," 2005 Meeting Papers 805, Society for Economic Dynamics.
    14. Panle Jia & Pinelopi K. Goldberg & Shubham Chaudhuri, 2006. "Estimating the Effects of Global Patent Protection in Pharmaceuticals: A Case Study of Quinolones in India," American Economic Review, American Economic Association, vol. 96(5), pages 1477-1514, December.
    15. Manez, J.A. & Waterson, M., 2001. "Multiproduct Firms and Product Differentiation: a Survey," The Warwick Economics Research Paper Series (TWERPS) 594, University of Warwick, Department of Economics.
    16. Austin B. Frakt & Steven D. Pizer & Roger Feldman, 2012. "Should Medicare adopt the Veterans health administration formulary?," Health Economics, John Wiley & Sons, Ltd., vol. 21(5), pages 485-495, May.
    17. Hongmin Li & Woonghee Tim Huh, 2011. "Pricing Multiple Products with the Multinomial Logit and Nested Logit Models: Concavity and Implications," Manufacturing & Service Operations Management, INFORMS, vol. 13(4), pages 549-563, October.
    18. Gang Liu, 2006. "On Nash equilibrium in prices in an oligopolistic market with demand characterized by a nested multinomial logit model and multiproduct firm as nest," Discussion Papers 454, Statistics Norway, Research Department.
    19. Ciara Whelan & Patrick P. Walsh & Franco Mariuzzo, 2004. "EU merger control in differentiated product industries," Open Access publications 10197/138, School of Economics, University College Dublin.
    20. Franco Mariuzzo & Patrick Paul Walsh & Ciara Whelan, 2003. "Firm Size and Market Power in Carbonated Soft Drinks," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 23(3_4), pages 283-299, December.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tex:carewp:9607. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Caroline Thomas (email available below). General contact details of provider: https://edirc.repec.org/data/deutxus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.