Publications
Local Market Structure and Consumer Prices: Evidence from a Retail Merger, with Jan Philip Schain & Joel Stiebale
Journal of Industrial Economics, Volume 69 (3), December 2021 [Link] [Latest WP Version]
Cited in European Commission JRC Report Retail alliances in the agricultural and food supply chain [Link]
Among most downloaded papers in the Journal of Industrial Economics
Presented at the European Commission in a DG Comp workshop on Buyer Power and Cost Pass-on
Covered in DICE Policy Brief, No. 13 (2018)
In this article, we conduct an ex post evaluation of a merger between two German grocery retailers. The bad news are: consumer prices increased due to higher retail market power (7% for the regions with the largest predicted increase in retail concentration). The good news are that merger efficiencies in retailing exist and can finally be measured. For instance, we find that prices declined in regions that did not see a rise in retail concentration but were potentially affected by cost savings within the merged entity. Overall, the merger raised average consumer prices only by a small amount (about 0.4%) given that market power effects and efficiency gains cancel out at the national level. However, there distributional effects: Regions with high competition (mainly cities) are less affected by increased market power and benefit more from efficiency gains, which implies that the merger hurt most consumers in rural areas.
How Resale Price Maintenance and Loss Leading affect Upstream Cartel Stability: Anatomy of a Coffee Cartel, joint with Emanuel Holler
International Journal of Industrial Organization 84, December 2022 [Link] [Latest version]
Best Empirical Paper Award 2022 in the International Journal of Industrial Organization (IJIO)
Presented at BECCLE in front of members of the Norwegian Competition Authority
In many recent cases (e.g., coffee, sweets, pet food, beer, beauty and personal hygiene, baby food, and baby cosmetics), we observe that producers collude on wholesale prices AND include retailers into the cartel by also raising prices retail prices (i.e., resale price maintenance). This is puzzling at first: Why would producer cartels want to raise final consumer prices? This is counterintuitive because the producer cartel collects profits from collusive wholesale prices times demand. But demand is decreasing in final retail prices, which likely reduces profits. In our study, we provide empirical evidence (testing predictions of Hunold & Muthers, 2021) that the producer cartel needs to involve retailers into the cartel (by raising retail prices and share part of the profits) because the retailer would refuse collusive wholesale prices without participating through resale price maintenance.
NB: In the paper, we refer to two court decisions by the Higher Court of Appeal. Our translations can be found here: [OLG Translation 2014] [OLG Translation 2018]
Vertical Restraints, Pass-Through, and Market Definition: Evidence from Grocery Retailing, with Justus Haucap, Ulrich Heimeshoff, Gordon J. Klein & Christian Wey,
International Journal of Industrial Organization 74, January 2021 [Link] [Latest WP Version]
Nominated for 2021 Antitrust Writing Awards (Economics)
Covered in DICE Policy Brief, No. 1 (2013)
Pass-through rates are widely discussed in the economic literature, e.g., in cartel damage claims or optimal taxation. We show that pass-through rates can also have significant effects in market definition exercises if industries are vertically structured. In general, higher pass-through rates lead to larger upstream market definitions according to the SSNIP test. Taking the example of grocery retailing, upstream markets (at the manufacturer level) can easily be defined too widely if the assumed pass-through rates are too high and vice versa. We illustrate our theoretical considerations with a detailed empirical analysis of German retailing markets (see Figure 3 for a graphic summary).