Strategic Behavior in the Automobile Market. Case of Colombia

Firms must make decisions based on market conditions and variables that become strategic when competing. The market makes product differentiation through advertising, quality, service, investment in R + D + I (Research, Development, Innovation), and price. These variables and strategic decisions are more interesting to study when the market is considered an oligopoly, as in the automotive market. This research seeks to combine literature and firm-level data with specific characteristics of the markets. Moreover, it tries to analyze if the strategic behavior of firms in the automotive market in Colombia is made through product differentiation where variables such as brand, type, range, price, and design are the most important. The databases were built with different information sources to try this hypothesis in the Colombia automobile market. All the data is in monthly unbalance panel data from April 2016 to July 2020, with 31 vehicle models. The proposed model combines the Bertrand and Goldberg (Goldberg PK Econometrica: Journal of the Econometric Society, 891–95 (1995)) model for supply. The main result is that product differentiation in the short term in the Colombian automobile market is made through brand and price.