Inelastic Buyers and Competition

Bibliographic Data

ID9713547
AuthorsGiacomo Calzolari (0000-0002-9679-2449, University of Bologna and CEPR), Andrea Ichino (0000-0001-8218-180X, University of Bologna European University Institute CEPR, IZA and CESifo, corresponding author), Francesco Manaresi (Bank of Italy), Viki Nellas (University of Bologna)
Year2018
Volume128
Issue615
Pages2843-2875
Publication date2018-11-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/ecoj.12558
OpenAlexW2188222399
LanguageEN
References cited18

We measure precisely how competition limits the capacity of sellers to appropriate surplus from less elastic consumers. The evidence originates from pricing strategies of Italian pharmacists in response to exogenous inflows of parents of newborn babies among their buyers. Population-based laws allow us to use a regression discontinuity design to compare different competitive environments. While more newborn babies have no effect on the price of hygiene products under intense competition, we observe a price increase when competition is low. This effect is not driven by increasing costs because for nappies, demanded by newborns only, we see no effect independently of competition

Biology · Competition (biology · Economics · Microeconomics · Population · Regression discontinuity design · Consumer Market Behavior and Pricing · Housing Market and Economics · Italy: Economic History and Contemporary Issues · Medicine

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