Demand, Competition and Public Policy in the Automobile Industry | 국외연구자료

KDI 경제교육·정보센터

Economic Information and Education Center

최신자료

Demand, Competition and Public Policy in the Automobile Industry

CEPR

2025.07.02

We review the flourishing literature on the automobile industry since the seminal work of Berry, Levinsohn and Pakes (1995), or briefly BLP. Their work has provided a structural equilibrium framework that forms a basis for conducting policy counterfactuals in several key areas of interest: competition policy and antitrust, trade policy, and taxation and environmental policy. The demand side of the `BLP framework‘ is micro-founded and allows for rich consumer heterogeneity to generate flexible substitution patterns between products. The supply side specifies marginal costs and accounts for imperfect competition. The review is focused around two main questions. First, what has been learned about policy issues relevant in the automotive industry using the BLP equilibrium framework? Second, how and how convincingly has the framework been evaluated to generate trust in the empirical findings and policy conclusions? We not only evaluate the framework in absolute terms, but also compare it with two complementary approaches. On the one hand, reduced-form work can estimate the magnitudes of policy effects with less reliance on assumptions and can, at least in principle, confront the measured policy effects with counterfactual predictions to evaluate the assumptions of structural models. On the other hand, more complex dynamic models with a drastically simplified demand side can capture specific features relating to the durability of cars and the second-hand market that are important for some policy questions.

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