Wednesday, January 5, 2022

Rising Markups and the Role of Consumer Preferences

Rising Markups and the Role of Consumer Preferences

 

Hendrik Döpper

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Alexander MacKay

Harvard University - Business School (HBS)

Nathan Miller

Georgetown University - Robert Emmett McDonough School of Business

Joel Stiebale

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

 

Abstract

We characterize the evolution of markups for consumer products in the United States from 2006 to 2019. We use detailed data on prices and quantities for products in more than 100 distinct product categories to estimate demand systems with flexible consumer preferences. We recover markups under an assumption that firms set prices to maximize profit. Within each product category, we recover separate yearly estimates for consumer preferences and marginal costs. We find that markups increase by about 25 percent on average over the sample period. The change is attributable to decreases in marginal costs that are not passed through to consumers in the form of lower prices. Our estimates indicate that consumers have become less price sensitive over time.

https://lawprofessors.typepad.com/antitrustprof_blog/2022/01/rising-markups-and-the-role-of-consumer-preferences.html

| Permalink

Comments

Post a comment