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Identification of Supply Models of Retailer and Manufacturer Oligopoly Pricing

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  • Villas-Boas, Sofia
  • Hellerstein, Rebecca

Abstract

This note outlines conditions under which we can identify a vertical supply model of multiple retailers’ and manufacturers’ oligopoly-pricing behavior. This is an important question particularly when the researcher believes, contrary to the traditional assumption followed in the empirical literature, that retailers may not be neutral pass-through intermediaries. We show that a data-set of an industry’s product prices, quantities, and input prices over time is sufficient to identify the vertical model of retailers’ and manufacturers’ oligopoly-pricing behavior given nonlinear demand, for homogeneous-products industries, and given multi-product firms, for differentiated-products industries.

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Bibliographic Info

Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt92x5f4j3.

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Date of creation: 01 Oct 2004
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Handle: RePEc:cdl:agrebk:qt92x5f4j3

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Keywords: Identification; Vertical relationships; Oligopoly models of multiple manufacturers and retailers;

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References

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  1. Rebecca Hellerstein, 2005. "A Decomposition of the Sources of Incomplete Cross-Border Transmission," 2005 Meeting Papers 805, Society for Economic Dynamics.
  2. Bresnahan, Timothy F., 1982. "The oligopoly solution concept is identified," Economics Letters, Elsevier, vol. 10(1-2), pages 87-92.
  3. Judith A. Chevalier & Anil K. Kashyap & Peter E. Rossi, 2003. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," American Economic Review, American Economic Association, vol. 93(1), pages 15-37, March.
  4. Julie H. Mortimer, 2008. "Vertical Contracts in the Video Rental Industry -super-1," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 165-199.
  5. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August.
  6. K. Sudhir, 2001. "Structural Analysis of Manufacturer Pricing in the Presence of a Strategic Retailer," Marketing Science, INFORMS, vol. 20(3), pages 244-264, October.
  7. K. Sudhir & Vrinda Kadiyali & Vithala R. Rao, 2001. "Structural Analysis of Manufacturer Pricing in the Presence of a Strategic Retailer," Yale School of Management Working Papers ysm229, Yale School of Management.
  8. Rebecca Hellerstein, 2004. "Who Bears the Cost of a Change in the Exchange Rate?," Econometric Society 2004 North American Summer Meetings 589, Econometric Society.
  9. Julie Holland Mortimer, 2002. "The Effects of Revenue-Sharing Contracts on Welfare in Vertically-Separated Markets: Evidence from the Video Rental Industry," Harvard Institute of Economic Research Working Papers 1964, Harvard - Institute of Economic Research.
  10. Nevo, Aviv, 1998. "Identification of the oligopoly solution concept in a differentiated-products industry," Economics Letters, Elsevier, vol. 59(3), pages 391-395, June.
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