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Collusion or Competition? Interfirm Relationships in the C hinese Auto Industry
Author(s) -
Hu WeiMin,
Xiao Junji,
Zhou Xiaolan
Publication year - 2014
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12035
Subject(s) - collusion , merge (version control) , industrial organization , business , competition (biology) , bertrand competition , microeconomics , market share , cartel , economics , marketing , oligopoly , computer science , cournot competition , ecology , biology , information retrieval
The C hinese passenger‐vehicle industry contains a large number of manufacturers. Some of them are members of big corporate groups centered around state owned enterprises. These corporate relationships may facilitate collusion. This paper applies the non‐nested hypothesis test methodology to data on passenger vehicles to identify whether price collusion exists within corporate groups or across groups. Our empirical results support the assumption of Bertrand Nash competition in the C hinese passenger‐vehicle industry: We find no evidence for within or cross‐group price collusion. Our policy experiments show that indigenous brands will gain market shares and profits if within‐group companies merge.