Competition in a spatially-differentiated product market with negotiated prices
n 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...
| Główni autorzy: | , , |
|---|---|
| Format: | Working paper |
| Język: | English |
| Wydane: |
University of Oxford : Economics
2020
|
| _version_ | 1826299133489577984 |
|---|---|
| author | Beckert, W Smith, H Takhashi, Y |
| author_facet | Beckert, W Smith, H Takhashi, Y |
| author_sort | Beckert, W |
| collection | OXFORD |
| description | n 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 nd because it imposes buyer price-taking. |
| first_indexed | 2024-03-07T04:57:17Z |
| format | Working paper |
| id | oxford-uuid:d70ae55e-7469-492e-bc1a-3d82f4da61c3 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T04:57:17Z |
| publishDate | 2020 |
| publisher | University of Oxford : Economics |
| record_format | dspace |
| spelling | oxford-uuid:d70ae55e-7469-492e-bc1a-3d82f4da61c32022-03-27T08:38:08ZCompetition in a spatially-differentiated product market with negotiated pricesWorking paperhttp://purl.org/coar/resource_type/c_1843uuid:d70ae55e-7469-492e-bc1a-3d82f4da61c3EnglishSymplectic ElementsUniversity of Oxford : Economics2020Beckert, WSmith, HTakhashi, Yn 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 nd because it imposes buyer price-taking. |
| spellingShingle | Beckert, W Smith, H Takhashi, Y Competition in a spatially-differentiated product market with negotiated prices |
| title | Competition in a spatially-differentiated product market with negotiated prices |
| title_full | Competition in a spatially-differentiated product market with negotiated prices |
| title_fullStr | Competition in a spatially-differentiated product market with negotiated prices |
| title_full_unstemmed | Competition in a spatially-differentiated product market with negotiated prices |
| title_short | Competition in a spatially-differentiated product market with negotiated prices |
| title_sort | competition in a spatially differentiated product market with negotiated prices |
| work_keys_str_mv | AT beckertw competitioninaspatiallydifferentiatedproductmarketwithnegotiatedprices AT smithh competitioninaspatiallydifferentiatedproductmarketwithnegotiatedprices AT takhashiy competitioninaspatiallydifferentiatedproductmarketwithnegotiatedprices |