How Consumer Information Curtails Market Power in the Funeral Industry

Abstract:     
The purpose of this article is to show, based on the case of the French market, that consumer perception of different funeral service offers can be sufficient to impose competitive pressures on the various suppliers, including the former monopolist. With a discrete choice experiment implemented in Lyon, France, we find evidence that, contrary to widely shared beliefs about this specific market, demand for funeral services seems characterized by relatively high price elasticities, at least as soon as consumers are fully informed about the opportunities open to them in this market. Consumer behavior has actually changed in favor of a better assessment of the different possibilities of services supplied and of their relative price. We then implement simulations in local markets and show that, with good consumer information, the market power of the supposedly dominant firm is much less important than it is generally believed. Furthermore, simulations stress the procompetitive effects of setting up a new storing facility by any businesses. We finally show that, if some improvements can still be brought to the functioning of this market, they should come from a better regulation of consumer information and of the entry of firms.

Number of Pages in PDF File: 34

Keywords: Funeral industry, Deregulation, Local competition, Market Power, Discrete choice models

JEL Classification: C25, D12, K23, L43

working papers series