Working Paper: CEPR ID: DP18627
Authors: Carsten Eckel; Lisandra Flach; Ning Meng
Abstract: Products produced by a multiproduct firm can be linked through demand linkages or supply linkages. On the demand side, changes in the price of one product can affect the demand for a firm's other products through shifts in consumer expenditures. This is commonly referred to as the cannibalization effect. On the supply side, joint inputs can create a dependency of one product's marginal costs on the output of other products. The existence of these linkages is important for how firms respond to shocks and has major implications for several performance measures, such as productivity and markups. This paper provides first empirical evidence for the existence of cannibalization linkages in presence of supply linkages, which is implied evidence for market power.
Keywords: multiproduct firms; cannibalization effect; demand linkages; supply linkages; antidumping duties; quality adjustment; markups
JEL Codes: D21; D24; F12; F13; F14; L11; L15; L25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Antidumping duties on one product (F18) | Reduction in markups in the affected market (D49) |
| Antidumping duties on one product (F18) | Increase in markups in non-affected markets (D49) |
| Reduction in aggregate output due to the duty (E23) | Lowers marginal costs (D40) |
| Lowers marginal costs (D40) | Increases market shares in non-affected markets (F69) |
| Cannibalization effect (D16) | Changes in demand for products based on price adjustments (D12) |
| Antidumping duties as a form of cost shock (F18) | Analysis of how firms adjust pricing and output decisions (L11) |