Empirical Evidence for Collusion in the U.S. Auto Market?

Abstract

A supergame theoretic price-setting model of collusion is calibrated to data from the North American passenger car market before, during, and after the voluntary restraint arrangements (VRAs) with Japan. Conclusions about whether the model is consistent with the bans from the various regimes depend on assumptions about market structure, demand elasticities, and discount factors. If one believes that the price elasticity of auto demand is about one, for example, then the calibrations suggest that in, the pre-VRA and VRA regimes, only General Motors and Ford could conceivably have colluded, and even this limited potential broke down in the post-VRA regime.