Procompetitive Effects of Foreign Competition on Domestic Markups

Elena Ianchovichina, James Binkley and Thomas Hertel

Review of International Economics, 2000, vol. 8, issue 1, 134-148

Abstract: A short‐run model for estimating the procompetitive effects of foreign competition on markups in an oligopolistic, domestic industry is developed and estimated using data on the Australian automobile industry. Estimates reveal that these effects are rather large and cannot be ignored when predicting the effects of a shock affecting foreign costs. These estimates can also facilitate inferences about the nature of interfirm rivalry.

Date: 2000
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