Rising Markups and the Role of Consumer Preferences

Hendrik Döpper, Alexander MacKay, Nathan H. Miller and Joel Stiebale

No 32739, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We characterize 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 product categories, we estimate flexible demand systems and recover markups under an assumption that firms set prices to maximize profit. Our empirical strategy obtains a panel of consumer preferences and marginal costs based on the estimation of separate random coefficient models by category and year. We find that markups increased by about 30 percent on average over the sample period. The change is primarily attributable to decreases in marginal costs, as real prices only increased slightly from 2006 to 2019. Our estimates indicate that consumers have become less price sensitive over time.

JEL-codes: D20 D40 L10 L2 L81 (search for similar items in EconPapers)
Date: 2024-07
New Economics Papers: this item is included in nep-com, nep-dcm, nep-ind, nep-reg and nep-upt
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