Markups and markdowns

Caselli, Mauro; Schiavo, Stefano; Nesta, Lionel

doi:10.1016/j.econlet.2018.09.026

Cited by 12 publications

(8 citation statements)

References 17 publications

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“…On the other hand, the PFA will yield estimates that are positive (negative), if the expenditure share of input j in revenue is smaller (larger) than the output elasticity associated with that input. As Caselli et al (2018) point out in their study on French manufacturing from 1990 to 2007, there is a significant number of firms which show negative markups, that is, firms selling at prices below MC. This applies particularly in the case of companies facing high sunk costs for investments which are expected to generate profits in the future.…”

Section: Identification Strategymentioning

confidence: 97%

“…This applies particularly in the case of companies facing high sunk costs for investments which are expected to generate profits in the future. Alternatively, it can be a strategically beneficial tactic to incur negative markups to outcompete rivals in the market and win market shares for the periods ahead (Caselli et al, 2018). Therefore, there may be good reasons for the occurrence of negative markups that are not due to optimization error but anticipated by firms although the traditional view on oligopoly/monopoly power rules out such cases (Lerner, 1934).…”

Section: Identification Strategymentioning

confidence: 99%

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Markup estimation: A comparison of contemporary methods at the example of European food retailers

Koppenberg

Hirsch

2021

Agribusiness

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We compare the economic and econometric assumptions of two contemporary procedures for the estimation of markups, the stochastic frontier approach (SFA) and the production function approach (PFA), and apply them to EU food retailing over the period 2010–2018. Although, the estimates of the underlying technology of the two methods are similar, our results suggest that the PFA leads to significantly larger markups, yielding approximated excess consumer expenditures 58.14%–313.33% larger than predicted by the SFA. In addition, the correlation of markups between the two methods is low. This can have implications for the consistency of policy recommendations based on the SFA and the PFA as they yield different outcomes with respect to the state of competition in a market. Last, we find a link between market concentration and markups for the PFA pointing towards adverse effects of further concentration on consumer welfare, whereas our results show no evidence for a relationship between SFA markups and market concentration. [EconLit Citations: D22, D43, L11, L13, L81, Q18]

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Section: Identification Strategymentioning

confidence: 97%

Section: Identification Strategymentioning

confidence: 99%

Markup estimation: A comparison of contemporary methods at the example of European food retailers

Koppenberg

Hirsch

2021

Agribusiness

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“…18 Caselli et al (2018) documents evidence of persistent negative price-cost margins in French manufacturing firms for the period 1990-2007. Persistent markdowns suggest ineffective market selection mechanism whereby less successful firms exit the market.…”

Section: Notesmentioning

confidence: 99%

Markups, Market Imperfections, and Trade Openness: Evidence from Ghana

Damoah¹

2019

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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“…(2) demand shocks faced by the firm. Hence, (𝜎 𝜎 − 1 ⁄ ) measures the mark-up (or mark-down -see Caselli et. al., 2018), of price over marginal cost, and thus the extent to which firms exploit market power.…”

Section: Data and Model Estimatedmentioning

confidence: 99%

The importance of frontier firms in total factor productivity in New Zealand, 2001–2016

Harris

2020

New Zealand Economic Papers

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Using firm-level panel data and estimating production functions for 37 industries, covering the 2001-16 period, this paper finds that firms in the Wellington region are on average about twice as productive as those in the rest of the South Island (which has the lowest average productivity). As to whether 'place' effects are the major explanation for such spatial differences, or whether 'firm mix' is more important, this study finds that agglomeration plays only a minor role in determining firm level productivity levels, while the importance of spatial factors in accounting for the differential between productivity in Wellington and other areas was generally very small.

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Markups and markdowns

Cited by 12 publications

References 17 publications

Markup estimation: A comparison of contemporary methods at the example of European food retailers

Markup estimation: A comparison of contemporary methods at the example of European food retailers

Markups, Market Imperfections, and Trade Openness: Evidence from Ghana

The importance of frontier firms in total factor productivity in New Zealand, 2001–2016

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