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Procompetitive Effects of Foreign Competition on Domestic Markups
Author(s) -
Ianchovichina Elena,
Binkley James,
Hertel Thomas
Publication year - 2000
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00211
Subject(s) - rivalry , economics , oligopoly , competition (biology) , shock (circulatory) , industrial organization , microeconomics , cournot competition , medicine , ecology , biology
A short‐run model for estimating the procompetitive effects of foreign competition on markups in an oligopolistic, domestic industry is developed and estimated using data on the Australian automobile industry. Estimates reveal that these effects are rather large and cannot be ignored when predicting the effects of a shock affecting foreign costs. These estimates can also facilitate inferences about the nature of interfirm rivalry.