Working Paper: NBER ID: w29013
Authors: Paul L. E. Grieco; Charles Murry; Ali Yurukoglu
Abstract: We construct measures of industry performance and welfare in the U.S. car and light truck market from 1980-2018. We estimate a differentiated products demand model for this market using product level data on market shares, prices, and product characteristics, and consumer level data on demographics, purchases, and stated second choices. We estimate marginal costs under the conduct assumption of Nash-Bertrand pricing. We relate trends in consumer welfare and markups to industry trends in market structure and the composition of products, like the rise of import competition, the proliferation of SUV's, and changes in vehicle characteristics. We find that although prices rose over time, concentration and market power decreased substantially. Consumer welfare increased over time due to improving product quality and falling marginal costs. The fraction of total surplus accruing to consumers also increased.
Keywords: No keywords provided
JEL Codes: L11; L62; D43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| changes in market structure and product composition (L16) | trends in consumer welfare (D11) |
| improvements in product quality and declining marginal costs (L15) | consumer welfare (D69) |
| decreasing market power and concentration (L49) | consumer welfare (D69) |
| declining marginal costs (D40) | consumer welfare (D69) |
| increases in product quality (L15) | consumer welfare (D69) |
| counterfactual scenarios eliminating increases in product quality and falling marginal costs (L15) | reductions in consumer surplus (D11) |