Information sharing and competition in the motor vehicle industry

Up to six months ahead of actual production, U.S. automakers announce plans for their monthly domestic production of cars. A leading industry trade jo urnal publishes the initial plans and then a series of revisions leading up to the month in question. We analyze a panel data set spanning the years 1 965-95, matching the production forecasts with data for actual monthly prod uction. We show that a firm's plan announcement affects competitors' later revisions of their own plans and eventual production. The interaction appea rs to be complementary: large plans or upward revisions cause competitors t o revise plans upward and increase production. The results are consistent w ith theoretical models in which firms share information about common demand parameters.