Working Paper: CEPR ID: DP9001
Authors: Franz Hackl; Michael E. Kummer; Rudolf Winterebmer; Christine Zulehner
Abstract: We investigate the causal effect of market structure on market performance in the consumer electronics. We combine data from Austria's largest online site for price comparisons with retail data on wholesale prices provided by a major hardware producer for consumer electronics. We observe input prices of firms, and all their moves in the entry and the pricing game over the whole product lifecycle. Using this information for 70 digital cameras, we generate instrumental variables for the number of firms in the market based on the shops' entry decisions on other product markets in the past. We find that instrumenting is particularly important for estimating the effect of competition on the markup of the price leader.
Keywords: market performance; market structure; markup; price dispersion; product lifecycle; retailing
JEL Codes: D43; L11; L13; L81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in the number of firms in the market (L19) | decrease in the markup of the price leader (D43) |
| increase in the number of firms in the market (L19) | decrease in the median firm's markup (L11) |
| increase in the number of firms in the market (L19) | decrease in the minimum markup (D43) |
| increase in the number of firms in the market (L19) | increase in price dispersion (D49) |
| historical entry decisions from other product markets (L19) | increase in the number of firms in the market (L19) |