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Prices And Endogenous Market Structure In Office Supply Superstores

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  • MARK D. MANUSZAK
  • CHARLES C. MOUL

Abstract

We consider the relationship between prices and market structure for office supply superstores in the U.S. which was central to the Federal Trade Commission's opposition to the merger of Staples and Office Depot. Due to potential biases in a standard regression, we employ a two‐stage approach in which a model of endogenous market structure provides correction terms for a second stage price regression. Using a cross‐section of data on market structures and Staples' prices, we find that excluding the correction term substantially distorts the importance of competitors as the two‐stage model yields stronger negative relationships between prices and market structure variables.

Suggested Citation

  • Mark D. Manuszak & Charles C. Moul, 2008. "Prices And Endogenous Market Structure In Office Supply Superstores," Journal of Industrial Economics, Wiley Blackwell, vol. 56(1), pages 94-112, March.
    • Handle: RePEc:bla:jindec:v:56:y:2008:i:1:p:94-112
    DOI: 10.1111/j.1467-6451.2008.00334.x
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    References listed on IDEAS

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    1. Andrew M. Cohen & Michael Mazzeo, 2004. "Competition, product differentiation and quality provision: an empirical equilibrium analysis of bank branching decisions," Finance and Economics Discussion Series 2004-46, Board of Governors of the Federal Reserve System (U.S.).
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