IDEAS home Printed from https://ideas.repec.org/a/sae/amerec/v45y2001i1p33-45.html
   My bibliography  Save this article

Dealership Competition in the U. S. Automobile Industry

Author

Listed:
  • Lall B. Ramrattan

Abstract

This paper develops a model of dealership rivalry for the U.S. auto industry in line with the research program of Joe Bain. In Bain's research, the literature depicts the auto industry as a differentiated oligopoly with non-price competition and price collusion. It has established advertising and R&D rivalry successfully, but has focused little attention to dealership competition. Because Bain has given a dominant role to dealership competition, this paper addresses the dealership rivalry problem. We found that a competitive model allowing a firm to react to a rival's past levels of advertising, R&D outlays, and the number of dealers, represents the firms' non-price competitive behavior well for the 1970–1996 period. The hypotheses we used have captured the joint effects of advertising, R&D, and dealerships, when explicit specifications for the financial constraints facing the firms are accounted for. We are able to statistically validate the hypothesis that U.S. firms do compete in dealership systems, as Joe Bain has predicted, within the differentiated oligopoly market structure. The results also allow some inferences regarding the sequential nature of non-price competition among the firms.

Suggested Citation

  • Lall B. Ramrattan, 2001. "Dealership Competition in the U. S. Automobile Industry," The American Economist, Sage Publications, vol. 45(1), pages 33-45, March.
    • Handle: RePEc:sae:amerec:v:45:y:2001:i:1:p:33-45
    DOI: 10.1177/056943450104500103
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/056943450104500103
    Download Restriction: no
    File URL: https://libkey.io/10.1177/056943450104500103?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Kashyap, Anil K & Wilcox, David W, 1993. "Production and Inventory Control at the General Motors Corporation during the 1920's and 1930's," American Economic Review, American Economic Association, vol. 83(3), pages 383-401, June.
    2. Phoebus J. Dhrymes & Mordecai Kurz, 1967. "Investment, Dividend, and External Finance Behavior of Firms," NBER Chapters, in: Determinants of Investment Behavior, pages 427-485, National Bureau of Economic Research, Inc.
    3. Blanchard, Olivier J, 1983. "The Production and Inventory Behavior of the American Automobile Industry," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 365-400, June.
    4. Anonymous, 1991. "The Automobile Industry," Business History Review, Cambridge University Press, vol. 65(4), pages 1-1, January.
    5. Grabowski, Henry G & Baxter, Nevins D, 1973. "Rivalry in Industrial Research and Development," Journal of Industrial Economics, Wiley Blackwell, vol. 21(3), pages 209-235, July.
    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. Lall B. Ramrattan, 1998. "R&D Rivalry in the U.S. Automobile Industry: A Simultaneous Equation Model Approach to Bain's Hypothesis," The American Economist, Sage Publications, vol. 42(1), pages 42-55, March.
    2. Maccini, Louis J. & Moore, Bartholomew & Schaller, Huntley, 2015. "Inventory behavior with permanent sales shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 53(C), pages 290-313.
    3. Durlauf, Steven N. & Maccini, Louis J., 1995. "Measuring noise in inventory models," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 65-89, August.
    4. Hall, George J., 2000. "Non-convex costs and capital utilization: A study of production scheduling at automobile assembly plants," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 681-716, June.
    5. Scott Schuh, "undated". "Evidence on the Link between Firm-Level and Aggregate Inventory Behavior," Finance and Economics Discussion Series 1996-46, Board of Governors of the Federal Reserve System (U.S.), revised 10 Dec 2019.
    6. George J. Hall, 1996. "Non-convex costs and capital utilization: a study of production and inventories at automobile assembly plants," Working Paper Series, Macroeconomic Issues WP-96-25, Federal Reserve Bank of Chicago.
    7. Liu, Wen-Hsien & Chung, Ching-Fan & Chang, Kuang-Liang, 2013. "Inventory change, capacity utilization and the semiconductor industry cycle," Economic Modelling, Elsevier, vol. 31(C), pages 119-127.
    8. Adam Copeland & George Hall & Louis J. Maccini, 2019. "Interest Rates and the Market for New Light Vehicles," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(5), pages 1137-1168, August.
    9. Mollick, Andre Varella, 2004. "Production smoothing in the Japanese vehicle industry," International Journal of Production Economics, Elsevier, vol. 91(1), pages 63-74, September.
    10. Fuhrer, Jeffrey C. & Moore, George R. & Schuh, Scott D., 1995. "Estimating the linear-quadratic inventory model Maximum likelihood versus generalized method of moments," Journal of Monetary Economics, Elsevier, vol. 35(1), pages 115-157, February.
    11. Hall, George & Rust, John, 2000. "An empirical model of inventory investment by durable commodity intermediaries," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 52(1), pages 171-214, June.
    12. Kollmann, Robert, 1997. "The cyclical behavior of mark ups in U.S. manufacturing and trade: new empirical evidence based on a model of optimal storage," Economics Letters, Elsevier, vol. 57(3), pages 331-337, December.
    13. Louis Maccini, 2013. "Inventory Behavior with Permanent Sales Shocks," Economics Working Paper Archive 608, The Johns Hopkins University,Department of Economics.
    14. Yang, Xiaolou, 2011. "Trade credit versus bank credit: Evidence from corporate inventory financing," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(4), pages 419-434.
    15. Robert E. Carpenter & Steven M. Fazzari & Bruce C. Petersen, 1994. "Inventory Investment, Internal-Finance Fluctuation, and the Business Cycle," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 75-138.
    16. Hamilton, James D., 2002. "On the interpretation of cointegration in the linear-quadratic inventory model," Journal of Economic Dynamics and Control, Elsevier, vol. 26(12), pages 2037-2049, October.
    17. Lawrence J. Christiano & Martin S. Eichenbaum, 1985. "A continuous time, general equilibrium, inventory-sales model," Working Papers 361, Federal Reserve Bank of Minneapolis.
    18. Nalewaik, Jeremy & Pinto, Eugénio, 2015. "The response of capital goods shipments to demand over the business cycle," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 62-80.
    19. John S. Strong & John R. Meyer, 1990. "Sustaining Investment, Discretionary Investment, and Valuation: A Residual Funds Study of the Paper Industry," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 127-148, National Bureau of Economic Research, Inc.
    20. Kenneth D. West & David W. Wilcox, 1993. "Some evidence on finite sample behavior of an instrumental variables estimator of the linear quadratic inventory model," Finance and Economics Discussion Series 93-29, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    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:sae:amerec:v:45:y:2001:i:1:p:33-45. 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: SAGE Publications (email available below). General contact details of provider: http://journals.sagepub.com/home/aex .

    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.