Markup and Product Differentiation in the German Brewing Sector

Giannis Karagiannis, Magnus Kellermann, Simon Pröll and Klaus Salhofer

No DP-68-2017, Discussion Papers from University of Natural Resources and Life Sciences, Vienna, Department of Economics and Social Sciences, Institute for Sustainable Economic Development

Abstract: In this paper we provide a method to separate the markup from product differentiation from other sources of market power, i.e. collusive behavior or market intransparency, based on the estimation of a single reduced form equation. We apply this method to a sample of 118 German breweries, since beer is a differentiated product and at the same time the sector has repeatedly been subject to collusive behavior. Our empirical results show that the "general" markup goes beyond the markup from product differentiation, but the latter accounts for most of the deviation of prices from marginal costs. Moreover, typically for a market with monopolistic competition, we observe average costs above marginal costs and, hence, a high markup does not necessarily translate into a high a profit margin.

Keywords: markup; product differentiation; monopolistic competition; Germany; brewing (search for similar items in EconPapers)
JEL-codes: L13 L66 (search for similar items in EconPapers)
Date: 2017
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Related works:
Journal Article: Markups and product differentiation in the German brewing sector (2018)
Working Paper: MARKUP AND PRODUCT DIFFERENTIATION IN THE GERMAN BREWING SECTOR (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:inwedp:dp682017

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