The Effects of Foreign Competition in the U.S. Domestic Full-Size Truck Market.
- This paper examines the impact of foreign competition on the U.S. market for full-size pickup trucks. The emergence of foreign competition has had a profound impact on domestic firms across industries and nations. Yet the precise nature of these effects differs by industry. In some cases, e.g., U.S. textiles, the emergence of foreign competition has led to a dramatic reduction of domestic output a... read mores consumers have switched to foreign goods. In others, e.g., Canadian wine, foreign competitions effect has instead spurred domestic innovation and quality improvement. The U.S. full-size pickup truck market presents a natural experiment regarding the market impact of foreign competition. Full-size trucks fall into one of two size categories, based on capacity. Within the U.S., foreign producers have focused on only the lighter duty segment, so that reviewing the differences between the two market segments permits identification of the effects that such competition has had. For this purpose, I use a hedonic approach to construct constant quality price indexes for both market segments in the U.S. between 1992 and 2012 and compare the movement of these indexes over time. The results demonstrate a relative increase in truck quality in the segment with foreign competition beginning at the time such competition emerged in 2000, but little effect on absolute market prices.read less