*We would like to thank the editor and two anonymous referees for helpful comments. This paper is the second chapter of Haiyan Deng's Ph.D. dissertation. She is most indebted to her advisor, Robert C. Feenstra, for his insightful guidance and comments. In addition, she is grateful to Deborah L. Swenson and James E. Prieger for valuable discussions and comments on an earlier version. Haiyan would also like to thank Wing T. Woo for keeping her updated about China's automobile industry development.
MARKET STRUCTURE AND PRICING STRATEGY OF CHINA'S AUTOMOBILE INDUSTRY*
Article first published online: 24 DEC 2010
© 2010 The Authors. The Journal of Industrial Economics © 2010 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics
The Journal of Industrial Economics
Volume 58, Issue 4, pages 818–845, December 2010
How to Cite
DENG, H. and MA, A. C. (2010), MARKET STRUCTURE AND PRICING STRATEGY OF CHINA'S AUTOMOBILE INDUSTRY. The Journal of Industrial Economics, 58: 818–845. doi: 10.1111/j.1467-6451.2010.00434.x
- Issue published online: 24 DEC 2010
- Article first published online: 24 DEC 2010
- differentiated products;
- nested logit model;
- Chinese automobile industry
In this study, using market-level data on quantities, prices' and automobile characteristics from 1995 to 2001, we conduct a market analysis of the Chinese automobile industry under imperfect competition. On the demand side, we apply a nested multinomial logit model to the national market share data in order to ascertain the demand features of China's automobile market. On the supply side, we assume Bertrand behavior to uncover the markups set by automobile manufacturers. Our empirical results suggest that some large automobile manufacturers set high markups, indicating their strong market power in China's automobile market. However, their declining markups in the late 1990's imply a reduction in market control by the major producers.