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Rising Markups and the Role of Consumer Preferences

Author

Listed:
  • Hendrik Döpper
  • Alexander MacKay
  • Nathan H. Miller
  • Joel Stiebale

Abstract

We analyze the evolution of markups for consumer products in the United States from 2006 to 2019. Using detailed data on prices and quantities for products in more than 100 distinct categories, we obtain a panel of markups, marginal costs, and flexible consumer preferences. Our empirical strategy uses separate random coefficients logit models for each category and year and an assumption that firms set prices to maximize profits. We find that markups increased by about 30% on average over the sample period. We attribute this change to decreases in marginal costs and a decline in consumer price sensitivity.

Suggested Citation

  • Hendrik Döpper & Alexander MacKay & Nathan H. Miller & Joel Stiebale, 2025. "Rising Markups and the Role of Consumer Preferences," Journal of Political Economy, University of Chicago Press, vol. 133(8), pages 2462-2505.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/735510
    DOI: 10.1086/735510
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    Cited by:

    1. Giovanni Compiani & Ilya Morozov & Stephan Seiler, 2025. "Demand Estimation with Text and Image Data," Papers 2503.20711, arXiv.org, revised Mar 2025.
    2. Jaan Masso & Amaresh K Tiwari, 2024. "Estimating Production Function And Productivity Impact Of Export Persistence In Presence Of Market Imperfections," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 150, Faculty of Economics and Business Administration, University of Tartu (Estonia).

    More about this item

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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