PRODUCT DIFFERENTIATION AND OLIGOPOLY IN INTERNATIONAL MARKETS - THE CASE OF THE UNITED-STATES AUTOMOBILE-INDUSTRY

This paper develops and estimates a model of the U.S. Automobile Indus try. On the demand side, a discrete choice model is adopted, that is e stimated using micro data from the Consumer Expenditure Survey. The es timation results are used in conjunction with population weights to de rive aggregate demand. On the supply side, the automobile industry is modelled as an oligopoly with product differentiation. Equilibrium is characterized by the first order conditions of the profit maximizing f irms. The estimation results are used in counterfactual simulations to investigate two trade policy issues: the effects of the VER, and exch ange rate pass-through.