Working Paper

Information sharing and competition in the motor vehicle industry

Abstract: Up to six months ahead of actual production, U.S. automakers announce plans for their monthly domestic production of cars. A leading industry trade journal publishes the initial plan and then a series of revisions leading up to the month in question. We analyze a panel data set spanning the years 1965--1995, matching the production forecasts with data for actual monthly production. We show that a firm's plan announcement affects competitors' later revisions of their own plans and eventual production. The interaction appears to be complementary---large plans or upward revisions cause competitors to revise plans upward and increase production. The results are consistent with models in which firms share information about common demand parameters.

Keywords: Automobile industry and trade;

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 1997

Number: 1997-4