Working Papers & Publications
The Portfolio Power Theory Revisited: Evidence from Cross-Category Mergers in US Retailing
Work in progress (early stage)
I study 57 cross-category mergers among manufacturers in the US consumer packaged goods retail industry to assess the presence, direction, and size of portfolio effects. In doing so, I exploit differences in the pre-merger bargaining positions of the manufacturers at different retailers. I provide evidence that the manufacturer with the weaker pre-merger bargaining position at a retailer can benefit from increased sales. This increase is driven by changes in quantities, not prices. In addition, I also study the effect on measures of marginal costs and perceived quality. I find that changes in perceived quality help explain these patterns but that marginal costs do not play an important role. Finally, I discuss possible channels that could lead to this result and how these channels are related to the portfolio power theory.
Rising Markups and the Role of Consumer Preferences
Revisions requested from Journal of Political Economy
We characterize the evolution of markups for consumer products in the United States from 2006 to 2019. We use detailed data on prices and quantities for products in more than 100 distinct product categories to estimate demand systems with flexible consumer preferences. We recover markups under an assumption that firms set prices to maximize profit. Within each product category, we recover separate yearly estimates for consumer preferences and marginal costs. We find that markups increase by about 30 percent on average over the sample period. The change is attributable to decreases in marginal costs that are not passed through to consumers in the form of lower prices. Our estimates indicate that consumers have become less price sensitive over time.
Presentations: CRESSE (2021, Crete), DICE Brown-Bag Seminar (2021, internal), RGS Doctoral Conference (2022, online), BECCLE (2022, Bergen), EEA (2022, Milano), EARIE (2022, Vienna), VfS (2022, Basel), Scientific Advisory Board of DICE (2022, internal)
Award: Robert F. Lanzillotti Prize for the best paper in antitrust economics (IIOC 2022)
Combinable Products, Price Discrimination, and Collusion
Revised and resubmitted to International Journal of Industrial Organization
We analyze the effect of different pricing schemes on horizontally differentiated firms' ability to sustain collusion when customers have the possibility to combine (or mix) products to achieve a better match of their preferences. To this end, we compare two-part tariffs with linear prices and quantity-independent fixed fees. We find that a ban of either price component of the two-part tariff makes it more difficult to sustain collusion at profit-maximizing prices. Moreover, linear pricing—as the most beneficial pricing schedule for customers in absence of collusion—harms customers most in presence of collusion.
Presentations: DICE Winter School (2019, Saas-Fee), CISS (2019, Ulcinj), CRESSE (2019, Rhodes), EARIE (2019, Barcelona), VfS (2023, Regensburg)
A Bargaining Perspective on Vertical Integration
Joint with Geza Sapi (DG Comp, European Commission) and Christian Wey
Accepted at Canadian Journal of Economics
We analyze vertical integration incentives in a bilaterally duopolistic industry with bargaining in the input market. Vertical integration incentives are a combination of horizontal integration incentives up- and downstream and depend on the strength of substitutability/complementarity and the shape of the unit cost function. Under particular circumstances, vertical integration can convey more bargaining power to the merged entity than a horizontal merger to monopoly. In a bidding game for an exogenously determined target firm, a vertical merger can dominate a horizontal one, while pre-emption does not occur.
Presentations: CISS (2018, Ulcinj), DICE Brown-Bag Seminar (2019, internal)