The Economics of the U.S. Automotive Industry: Studies on Regulation and Competition
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This dissertation is about the U.S. automobile industry. In the first part, I study an environmental policy that ascribes a fee or a rebate to each new vehicle in the marketplace, depending on the vehicle’s fuel economy rating; thus, it is called a ’feebate’. Feebates can be designed to reach optimal outcomes given assumptions on people’s preferences and welfare from buying cars. Since a feebate is a function from fuel economy ratings to cash, I study how feebate functional form affects the efficacy of the policy as well as some distributional outcomes. I conclude that a feebate policy, represented by a logistic functional form in which larger portions of consumers face high marginal incentives to increase fuel economy, brings about improved outcomes over other functional forms. The second part of this dissertation explores the nature of local competition and tests the existence of local market power held by car dealerships. In the empirical model, I exploit variation in local competition that is caused by factors external to the dynamics of local demand and supply. I compare the pricing response of dealerships in affected local markets relative to the pricing behavior of dealerships in markets which were not affected. I find that decreased competition caused consumers to pay higher prices for their vehicles both through a sales mix, as well as a negotiations, mechanism. I find evidence that dealers target consumers strategically, as the incidence of the price increases falls disproportionately on buyers of SUVs who engaged in a secondary transaction of a trade-in. I conclude that dealers exercise local market power when afforded by consumers who signal higher willingness to pay and bargaining disutilities.
Karsagi, Ephraim (2018). The Economics of the U.S. Automotive Industry: Studies on Regulation and Competition. Doctoral dissertation, Texas A & M University. Available electronically from