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When the Baby Cries at Night: Inelastic Buyers in Non-Competitive Markets

Giacomo Calzolari (), Andrea Ichino, Francesco Manaresi () and Viki Nellas ()
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Viki Nellas: University of Bologna

No 8490, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We investigate empirically how sellers react to changes in the population of their consumers, identifying the effects of demand composition and demand size with limited information on costs. We show how pharmacists in Italy selectively increase the price of some products when they observe in their cities an exogenous influx of parents of newborns, conceivably less elastic buyers as compared with other more experienced and less pressed consumers. Exploiting population based laws that fix the number of pharmacies in a city, we use RDD to measure the effect of competition on sellers' ability to extract surplus from less elastic buyers.

Keywords: demand elasticity; consumer's information; price competition; pharmacies; regression discontinuity (search for similar items in EconPapers)
JEL-codes: D43 D83 L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-mkt
Date: 2014-09
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Working Paper: When the baby cries at night. Inelastic buyers in non-competitive markets (2013) Downloads
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