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Empirical Evidence for Collusion in the U.S. Auto Market?

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  • Val Eugene Lambson
  • J. David Richardson

Abstract

A supergame theoretic price-setting model of collusion is calibrated to data from the North American passenger car market before, during, and after the voluntary restraint arrangements (VRAs) with Japan. Conclusions about whether the model is consistent with the bans from the various regimes depend on assumptions about market structure, demand elasticities, and discount factors. If one believes that the price elasticity of auto demand is about one, for example, then the calibrations suggest that in, the pre-VRA and VRA regimes, only General Motors and Ford could conceivably have colluded, and even this limited potential broke down in the post-VRA regime.

Suggested Citation

  • Val Eugene Lambson & J. David Richardson, 1992. "Empirical Evidence for Collusion in the U.S. Auto Market?," NBER Working Papers 4111, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4111
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    References listed on IDEAS

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    1. Domowitz, Ian & Hubbard, R Glenn & Petersen, Bruce C, 1987. "Oligopoly Supergames: Some Empirical Evidence on Prices and Margins," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 379-398, June.
    2. Davidson, Carl & Deneckere, Raymond, 1984. "Horizontal mergers and collusive behavior," International Journal of Industrial Organization, Elsevier, vol. 2(2), pages 117-132, June.
    3. William A. Brock & José A. Scheinkman, 1985. "Price Setting Supergames with Capacity Constraints," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(3), pages 371-382.
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    Cited by:

    1. Emmanuel Dechenaux & Dan Kovenock, 2011. "Endogenous rationing, price dispersion and collusion in capacity constrained supergames," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(1), pages 29-74, May.

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