Cyclical Behavior of Prices and Quantities in the Automobile Market

56 Pages Posted: 27 Apr 2000 Last revised: 17 Aug 2010

See all articles by Olivier J. Blanchard

Olivier J. Blanchard

National Bureau of Economic Research (NBER); Peter G. Peterson Institute for International Economics

Angelo Melino

University of Toronto

Date Written: April 1984

Abstract

This paper has a simple goal, that of understanding the joint behaviorof prices and quantities in a particular market. More precisely, it examines whether we can find decision problems for suppliers and buyers, together with a market equilibrium structure, which are consistent with the observed price and quantity time series. Because of the relative homogeneity of the product, of the size of the market, end of the quality of the data, the market chosen is the automobile market.The first conclusion we reach is that this goal is difficult to achieve.The behavior of prices appears inconsistent with simple -- competitive, monopolistically competitive or monopolistic -- market structures. Prices appear, in a well defined sense, to be too "sticky". We then consider potentiail explanations and extensions. None appears completely satisfactory. In particular, the introduction of costs of changing prices does not seem able to explain the joint behavior of prices and quantities.

Suggested Citation

Blanchard, Olivier J. and Melino, Angelo, Cyclical Behavior of Prices and Quantities in the Automobile Market (April 1984). NBER Working Paper No. w1325. Available at SSRN: https://ssrn.com/abstract=227142

Olivier J. Blanchard (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Angelo Melino

University of Toronto ( email )

Department of Economics
Toronto, Ontario M5S 3E6
Canada
(416)978-6541 (Phone)
(416)978-6713 (Fax)

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