Markups for Consumers

Bernhard Ganglmair (), Alexander Kann () and Ilona Tsanko ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: A central motivating factor for studying price markups is their effect on consumer welfare. Reported estimates of (firm-level) price markups in the literature, however, are often focused on industry or cross-country comparisons. These treat different industries equally rather than based on how relevant they are for consumers. We propose markup measures in which firm-level price markups are weighted according to consumption expenditures in the respective industries. Using a concordance table between consumption categories (otherwise used for the calculation of consumer price indices) and a firm's industry classification, we report results for Germany for the years 2002 through 2016. We find that consumption-weighted price markups are higher than the conventionally reported revenue-weighted markups. We further show that consumption-weighted markups have increased faster, in particular for medium-income households, which highlights a potential role of price markup as a contributing factor to changes of inequality in society.

Keywords: COICOP; consumption weights; Germany; inequality; price markups (search for similar items in EconPapers)
JEL-codes: D63 E31 K21 L11 L40 (search for similar items in EconPapers)
Pages: 31
Date: 2021-04
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Journal Article: Markups for Consumers (2021)
Working Paper: Markups for consumers (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2021_282

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