Working Paper: NBER ID: w12012
Authors: Judith Chevalier; Fiona Scott Morton
Abstract: We utilize a new micro dataset of prices of funeral goods and services at individual funeral homes, plus data from the Census to examine the effects of state regulations that restrict entry into funeral goods market. In particular, some states have regulations that allow only licensed funeral homes to sell caskets, while others allow unlicensed retailers, such as Costco, to compete with funeral homes in the sale of caskets. However, as caskets and funeral services are complements, generally purchased in one-to-one proportions, it is not a priori clear that casket sale restrictions can expand the rent extraction capabilities of licensed funeral homes. Our results suggest that when courts lift funeral goods sales restrictions the prices of funeral goods fall but the prices of funeral services rise by nearly as much. Overall, our results support the "one monopoly rent" hypothesis; we do not find that overall funeral home revenues decline when funeral goods sales are lifted.
Keywords: funeral goods; regulations; market competition; consumer welfare
JEL Codes: L11; L13; L40; L43; L84
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lifting of casket sales restrictions (Z18) | prices of funeral goods (Q31) |
| lifting of casket sales restrictions (Z18) | prices of funeral services (L84) |
| lifting of casket sales restrictions (Z18) | total price paid by consumers for both funeral goods and services (H49) |