Title: Pricing strategy, mark-up adjustment and foreign competition in the car industry

Authors: Manuchehr Irandoust, Abdulnasser Hatemi-J

Addresses: Department of Economics, University of Orebro, SE-701 82, Orebro, Sweden. ' Department of Economics, University of Skovde, PO Box 408, SE-541 28, Skovde, Sweden

Abstract: This paper examines, empirically, the impact of exchange rate fluctuations and foreign competition on pricing strategy in the car industry. The study shows how the Swedish car export prices react to exchange rate changes and market conditions in the five major destination markets (France, Germany, Japan, the UK, and the USA). It has been demonstrated, through non-stationary panel analysis, that the Swedish export prices in the car industry change but not in proportion to exchange rate changes. The evidence reveals that price adjustments are associated with stabilisation of local currency prices. Our findings also show that the pricing behaviour of the Swedish car exporters varies across destination markets and such variations could be related to market-specific characteristics and market structure.

Keywords: automobile industry; exchange rate fluctuations; market structure; panel cointegration; panel unit roots; pricing to market; pricing strategy; mark-up adjustment; foreign competition; Sweden; automotive export prices.

DOI: 10.1504/IJATM.2005.008223

International Journal of Automotive Technology and Management, 2005 Vol.5 No.3, pp.305 - 319

Published online: 23 Nov 2005 *

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