A study of the Turkish automobile industry: a game theoretical approach

In this dissertation we present a theoretical and empirical analysis of price and non-price competition of firms in the Turkish Automobile Industry. In the past, this industry has been highly protected from foreign competition and shielded from competitive developments of the world market. The 1990's, however, brought about significant changes in the Turkish Automobile industry with respect to quality standards, degree of competition, and degree of product differentiation as a result of relaxed trade restrictions.

An important question to ask is what, if any, are the effects of these changes in the market environment with respect to the price and non-price competition of the firms? We are trying to find an answer to this question by applying what is known as the New Empirical Industrial Organization "NEIO". While using this new approach is by itself an important contribution, an additional and perhaps even more important contribution of this study lies in the fact that there are no empirical studies with respect to the Turkish Automobile Industry. The few studies that do exist do not go beyond a mere description of the industry structure. Therefore, the research at hand is rather unique in both its methodology and scope. The empirical work is based on a game theoretic model and the utilized data set is rather unique and not readily available.

By estimating alternative hypothetical market games and testing the validity of these games for the Turkish Automobile industry, we conclude that the Turkish Automobile industry is best viewed as an industry in which there is a leader-follower relationship between the firms.