ABSTRACT
There are three important features to incorporate in a model which would be useful for the current analysis. First, the model should characterize the vertical structure of the automobile industry. That is, the linkages between manufacturers, dealers and consumers must be adequately represented. Second, the model should advance the estimation of structural and behavioral parameters of demand and supply for the domestic car market. Changes in these parameters resulting from changes in consumer preferences and the implementation of the Voluntary Export Restraint should also be estimated. Third, the model should facilitate econometric simulation of market equilibrium under different market conditions. There is support for empirical estimation of the conjectural variation (CV) parameters even though its theoretical consistency is criticized in the game theory literature. The main advantage of estimating CV parameters is that they assume values which are consistent with known oligopoly solutions.
