New Evidence of Market Competition in the Japanese Tire Industry Using Market Share Analysis

ABSTRACT

We present a simple, yet powerful, battery of univariate and panel unit root tests on market shares to draw some inferences regarding the level of rivalry within an industry. As an application, we employ them on the Japanese tire industry over a 40-year period. We find that rivalry seems to be present among the smaller firms, while at the same time, the dominant firm seems unperturbed by the competition. We compare these conclusions with a previous study of the industry.

KEYWORDS:

• Collusion
• tires
• Japan
• competition
• market shares
• unit root test

Acknowledgments

The authors would like to thank Yuki Hashimoto from the Research Institute of Economy, Trade and Industry (RIETI) in Japan for her comments as a discussant when this paper was presented at the East Asian Economic Association’s 16th biannual International Convention held at National Taiwan University in Taipei October 27th and 28th, 2018.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. For more details about the Japanese automobile tire industry, visit the homepage of the Japan Automobile Tire Manufacturers Association (JATMA) at http://www.jatma.or.jp/media/pdf/tire_industry_2017.pdf.

2. Stock and Watson (2015, p. 569).

3. This is only an approximation. For instance, see Göcke, p. 180–182 for a further distinction between “unit root hysteresis” and “genuine hysteresis”.

4. Though the notation differs somewhat, these Equations (1) and (2) follow Gallet and List (2001, p. 474–475) and Carlino and Mills (1996, p. 600) very closely.

5. In the case of the bid-rigging scheme in 2004 in tires sold to the Japanese Defense Agency, agreed-upon market shares were very precise. E.g. Bridgestone was to get 35.55% of the market.

6. The critical values differ, of course, from those of standard OLS because the ADF statistic does not have a normal distribution.

7. For more details, see Dabbah and Lasok (2008) or visit the JFTC homepage at http://www.jftc.go.jp/en/pressreleases/yearly_2003/apr/individual_000393.html.