Cost and Total Factor Productivity in the Turkish Automotive Industry

Abstract: the main objective of this study is to analyze the production cost and total factor productivity of turkish automotive industry as an example of differentiated oligopoly market for the period of 1992-2011. to achieve this goal, data envelopment analysis and malmquist total factor productivity index methods applied separately for each period. moreover, by taking into account product characteristics produced by firms into turkish automotive industry, it is to put forward a hedonic cost function for whole industry and is to estimate an elasticity of substitution, economies of scale and economies of scope. consequently, the change in total factor productivity and its components were estimated for the firms into turkish automotive industry. additionally, the hedonic cost function was estimated for turkish automotive industry firms among the same period. it was concluded that factors of production used to be substitutes for each other and the industry positively affected from economies of scope for companies engaged in the production.