Beckert, Walter and Smith, H. and Takahashi, Y. (2020) Competition in a spatially-differentiated product market with negotiated prices. Discussion Paper. Centre for Economic Policy Research (CEPR). (Unpublished)
Abstract
In many markets the buyer pays an individually-negotiated price. Theoretically, relative to uniform-pricing, this has an ambiguous impact on market power and the effects of merger. To analyze competition in the UK brick industry-where individually-negotiated pricing is used, and the market is highly concentrated-we develop a model of negotiated pricing and discrete-choice demand which permits alternative specifications for how the buyer's runner-up product affects price negotiations. We derive a likelihood for observed choices and prices and estimate the model using transaction-level data. We use the model to reject the hypothesis of price-taking buyers, calculate the distribution of markups, and measure the effect on markups of multi-product ownership and buyer location. A counterfactual policy of uniform pricing increases average markups by about one-third, harms most buyers, and magnifies the price-increasing effect of merger. Average markups increase because uniform pricing is intrinsically less competitive and because it imposes buyer price-taking.
Metadata
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Additional Information: | CEPR Discussion Paper DP15379 |
| Keyword(s) / Subject(s): | Bargaining, construction supplies, individualized pricing, Merger Analysis, price discrimination, Spatial differentiation |
| School: | Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School |
| Depositing User: | Walter Beckert |
| Date Deposited: | 28 Oct 2020 11:31 |
| Last Modified: | 02 Aug 2023 18:04 |
| URI: | https://eprints.bbk.ac.uk/id/eprint/41033 |
Statistics
Additional statistics are available via IRStats2.
Archive Staff Only (login required)
