variety of automobiles they service. There were 14,000 licensed dealer repair shops and 62,000 independent licensed garages in 1989.
Such heavy dependence of dealer repair shops on “genuine” parts might have lowered competition among parts manufacturers. The 1991 automobilepartspricesurvey, jointly conducted by DOC and MITI, found that prices of identical or comparable uninstalled parts were 340 percent higher in Japan than in the United States. For installed parts, the prices were 198 percent higher in Japan. The report pointed out that virtually no U.S. made
This paper surveys the recent literature on the Japanese distribution system to consider two propositions: first, that the system is inefficient, and second that prices of imported products tend to be higher in Japan than in other markets. Most of the literature demonstrates that the system is efficient. However, the efficiency has not necessarily resulted in high social welfare as consumers have had limited access to various product lines or paid high prices for some products. This paper examines the distribution system in the automobile industry to promote understanding about the impacts of the system on price differentials.