Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/235194
Authors: 
Karagiannis, Giannis
Kellermann, Magnus
Pröll, Simon
Salhofer, Klaus
Year of Publication: 
2017
Series/Report no.: 
Diskussionspapier No. DP-68-2017
Abstract: 
In this paper we provide a method to separate the markup from product differentiation from other sources of market power, i.e. collusive behavior or market intransparency, based on the estimation of a single reduced form equation. We apply this method to a sample of 118 German breweries, since beer is a differentiated product and at the same time the sector has repeatedly been subject to collusive behavior. Our empirical results show that the "general" markup goes beyond the markup from product differentiation, but the latter accounts for most of the deviation of prices from marginal costs. Moreover, typically for a market with monopolistic competition, we observe average costs above marginal costs and, hence, a high markup does not necessarily translate into a high a profit margin.
Subjects: 
markup
product differentiation
monopolistic competition
Germany
brewing
JEL: 
L13
L66
Document Type: 
Working Paper

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