Munich Personal RePEc Archive

Concentration, Retail Markups, and Countervailing Power: Evidence from Retail Lotteries

Giroldo, Renato and Hollenbeck, Brett (2021): Concentration, Retail Markups, and Countervailing Power: Evidence from Retail Lotteries.

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Abstract

In this note, we investigate the causal link between market concentration and markups in a retail setting. We study the Washington retail cannabis industry, which features exogenous variation in market concentration that resulted from retail licenses being awarded via lotteries. We observe markups directly. We find a negative causal relationship between markups and concentration, where more concentrated markets have significantly lower markups and wholesale prices. The results provide direct evidence of countervailing buyer power by retailers. These results highlight the value of using industry specific data and rich models of competition to advance the debate on concentration and markups.

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