Price Dispersion in China’s Domestic Passenger Cars Markets:Theoretical and Empirical Analysis
Read
DownLoad |
| Title | Price Dispersion in China’s Domestic Passenger Cars Markets:Theoretical and Empirical Analysis
|
| Author | Yu Linhui and Lu Jiangyong |
| Organization | Business and Economics, The University of Hongkong；Guanghua School of Management, Peking University |
| Email | yulh@hku.hk；lujiangyong@gsm.pku.edu.cn |
| Key Words | Car Industry; Market Fragmentation; Price Dispersion; Regional Inequality |
| Abstract | Using monthly selling prices of 20 cars in China’s 36 big cities during 2004-2006, this paper investigates the Law of One Price in China’s domestically-manufactured passenger car markets. We find rising price dispersion for almost all 20 cars in China’s big cities during the period examined, and this trend is further confirmed after the physical characteristics of cars are controlled for by Hedonic pricing models. We try to explain the rising price gap under the demand of supply framework facing car users and oligopolistic car producers. Our empirical findings indicate that the increasing inequality of car demand and car supply among different cities both have significant impacts on the rising price dispersion of passenger cars in China, but supply inequality has more explanation power on the market fragmentation of China’s passenger car markets than the demand inequality. |
| Serial Number | WP90 |
| Time | 2011-07-20 |
|