Do Increasing Markups Matter? Lessons from Empirical Industrial Organization / Steven T. Berry, Martin Gaynor, Fiona Scott Morton.

Format:

Book

Author/Creator:

Berry, Steven T.

Contributor:

National Bureau of Economic Research.

Gaynor, Martin.

Scott Morton, Fiona.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26007.

NBER working paper series no. w26007

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

This paper considers the recent literature on firm markups in light of both new and classic work in the field of Industrial Organization. We detail the shortcomings of papers that rely on discredited approaches from the "structure-conduct-performance" literature. In contrast, papers based on production function estimation have made useful progress in measuring broad trends in markups. However, industries are so heterogeneous that careful industry specific studies are also required, and sorely needed. Examples of such studies illustrate differing explanations for rising markups, including endogenous increases in fixed cost associated with lower marginal costs. In some industries there is evidence of price increases driven by mergers. To fully understand markups, we must eventually recover the key economic primitives of demand, marginal cost, and fixed and sunk costs. We end by discussing the various aspects of antitrust enforcement that may be of increasing importance regardless of the cause of increased markups.

Notes:

Print version record

June 2019.