We explore the determinants and effects of trust relationships between upstream suppliers and downstream producers. Using unique survey data on individual supplier-buyer relationships in the German automotive industry, we show, by means of different measures of supplier-buyer trust, that higher...

The disclosure of the VW emission manipulation scandal caused a quasi-experimental market shock in the observable quality of VW diesel vehicles. We consider a classical model for adverse selection and sorting to derive an empirically testable hypothesis about the impact of observable quality on...

In the automobile industry, as in many tradable goods markets, firms earn their highest market share within their domestic market. This home market advantage persists despite substantial integration of international markets during the past several decades. The goal of this paper is to quantify...

Using data from the U.S. automobile market, we empirically examine the link between competition and innovation. Consistent with a large literature, we use patent counts as a measure of innovation. The combination of the U.S. market's economic importance, market dynamics, and the significant...

We develop a simple theoretical model of a long term buyer-supplier relationship with non-contractible buyer specific R&D investment, and derive predictions on the effects of trust and competition on suppliers' investment and buyers' procurement strategies. We address these issues empirically...

This paper analyzes the economic effects of content-based import tariffs China imposed on imported auto parts. While China’s policy penalized any firm that assembled cars with less than 60 percent Chinese content, the policy was most likely to affect foreign affiliated firms who were more...

Who does, and who should initiate costly certification by a third party under asymmetric quality information, the buyer or the seller? Our answer - the seller - follows from a nontrivial analysis revealing a clear intuition. Buyer-induced certification acts as an inspection device,...

We introduce transport cost of trade in products into the classical Zodrow and Mieszkowski (1986) model of capital tax competition. It turns out that even small levels of transport cost lead to a complete breakdown of the seminal result, the underprovision of public goods. Instead, there is a...