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Cost Pass-Through in the U.S. Automobile Market
UnavailablePublisher: Journals Gateway
The Review of Economics and Statistics (2000) 82 (2): 316–324.
Published: 01 May 2000
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We study cost pass-through in the U.S. automobile market using a framework that incorporates the effects of cost changes on input decisions. We find that accounting for firms' factor-market decisions significantly increases measured cost pass-through, although we reject the hypothesis of full cost pass-through and constant markups. In addition, our evidence suggests that cost shocks common to all manufacturers have a greater effect on prices than do model-specific cost shocks. Finally, we examine how pass-through varies with manufacturer nationality, finding that U.S. firm cost pass-through exceeds that of European and Asian firms.