An Empirical Analysis of the Effects of OEM Agreements Between Competitors

Shintaro Minamoto ()
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Shintaro Minamoto: Graduate School of Economics, The University of Osaka

No 26-07, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: Original equipment manufacturing (OEM) agreements between competing firms play a significant role in improving production efficiency through scale economies. At the same time, however, they can also reduce market competition. This study empirically examines the effects of OEM agreements on competition and welfare in the Japanese automobile industry. I develop and estimate structural models incorporating OEM agreements, market competition, and scale economies. The results indicate that efficiency improvements lead to significant welfare gains, even when these agreements reduce competition. These findings provide empirical insights into the trade-off involved in such agreements and contribute to competition policy regarding modern supply chains.

Keywords: OEM; horizontal subcontracting; scale economies; vertical relationships (search for similar items in EconPapers)
JEL-codes: L13 L22 L62 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2026-06
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