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Interpreting markups in Spanish manufacturing: The exponential model

Corchón, Luis C. and Moreno, L. (2010): Interpreting markups in Spanish manufacturing: The exponential model.

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Abstract

In this paper we attempt to rationalize markups in a sample of Spanish manufacturing by assuming a representative consumer, profit-maximizing firms and constant returns to scale. We find that the standard forms of demand (CES and linear) do not provide a good explanation of markups. In contrast, a model where the representative consumer has an exponential utilty function yields results that match data more closely.

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