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

43 Pages Posted: 4 Oct 2014

See all articles by Giacomo Calzolari

Giacomo Calzolari

European University Institute - Economics Department (ECO); Centre for Economic Policy Research (CEPR); University of Bologna

Andrea Ichino

University of Bologna

Francesco Manaresi

Bank of Italy

Viki Nellas

University of Bologna

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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

JEL Classification: D43, D83, L13

Suggested Citation

Calzolari, Giacomo and Ichino, Andrea and Manaresi, Francesco and Nellas, Viki, When the Baby Cries at Night: Inelastic Buyers in Non-Competitive Markets. IZA Discussion Paper No. 8490. Available at SSRN: https://ssrn.com/abstract=2505352

Giacomo Calzolari (Contact Author)

European University Institute - Economics Department (ECO) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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University of Bologna ( email )

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HOME PAGE: http://sites.google.com/view/giacomo-calzolari

Andrea Ichino

University of Bologna ( email )

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Italy
+39 349 5965919 (Phone)

Francesco Manaresi

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Viki Nellas

University of Bologna ( email )

Strada Maggiore 45
Bologna, 40125
Italy

HOME PAGE: http://https://sites.google.com/site/vikinellas/home

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