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Scalable Demand and Markups

Author

Listed:
  • Enghin Atalay
  • Erika Frost
  • Alan Sorensen
  • Christopher Sullivan
  • Wanjia Zhu

Abstract

We study changes in markups across 70 product markets from 2006 to 2018. A growing literature has documented rising markups using a production function approach. We instead estimate demand and invert firms’ first-order pricing conditions to infer markups. To make the method scalable, we propose estimating nested logit demand models using household panel data to automate the assignment of products to nests. We find an overall upward trend in markups, with considerable heterogeneity across and within product markets. These increases are primarily driven by changes in firms’ marginal costs and households’ price sensitivity instead of changes in firm ownership.

Suggested Citation

  • Enghin Atalay & Erika Frost & Alan Sorensen & Christopher Sullivan & Wanjia Zhu, 2026. "Scalable Demand and Markups," Journal of Political Economy, University of Chicago Press, vol. 134(8), pages 2488-2522.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/741641
    DOI: 10.1086/741641
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    JEL classification:

    • L0 - Industrial Organization - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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