The impact of markup ceiling regulation on prices

Christos Genakos (Athens University of Economics) 

Riccardo Faini CEIS Seminars

Riccardo Faini CEIS Seminars
When

Friday, April 4, 2014 h. 12:00-13:30

Where
Room B - 1st floor
Description

We test the impact of markup ceiling regulation in an oligopolistic market, using data from the retail market of fruits and vegetables in Greece. In 2010 the Greek government as part of a larger package of market reforms aiming at liberalizing the economy hastily cancelled a law imposing maximum wholesale and retail margins for all fruits and vegetables, except for five products. To identify the impact of deregulation on prices, we compare prices of products affected by regulation before and after the policy change and use the unregulated products as a control group. We find that abolishing markup regulation led to a significant decrease in both retail and wholesale prices. However, we also find that, after accounting for wholesale prices, retail prices were not significantly affected by regulation. This suggests that regulation affected wholesalers and only indirectly retailers, who adjusted their price level but not their markups. We provide additional evidence consistent with markup ceilings providing a focal point for collusion among wholesalers.

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