Measuring the Welfare of Intermediaries in Vertical Markets

67 Pages Posted: 10 Dec 2018 Last revised: 5 Oct 2020

See all articles by Javier D. Donna

Javier D. Donna

Assistant Professor of Economics

Pedro Pereira

Autoridade da Concorrência

Tiago Pires

University of North Carolina (UNC) at Chapel Hill

Andre Trindade

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças

Date Written: May 18, 2019

Abstract

We empirically investigate the welfare of intermediaries in oligopolistic markets, where intermediaries offer additional services. We exploit the unique circumstance that, in our empirical setting, consumers can purchase from manufacturers or intermediaries. We specify an equilibrium model, and estimate it using product-level data. The demand includes consumers with costly search and channel-specific preferences. The supply includes two distribution channels. One features bargaining about wholesale prices between manufacturers and intermediaries, and price competition among intermediaries. The other is vertically integrated. The model is used to simulate counterfactuals, where intermediaries do not offer additional services. We find that intermediaries increase welfare.

Keywords: L81, L42, D83, M37

JEL Classification: Intermediaries, vertical markets, search frictions, bargaining, outdoor advertising

Suggested Citation

Donna, Javier D. and Pereira, Pedro and Pires, Tiago and Trindade, Andre, Measuring the Welfare of Intermediaries in Vertical Markets (May 18, 2019). Available at SSRN: https://ssrn.com/abstract=3285205 or http://dx.doi.org/10.2139/ssrn.3285205

Javier D. Donna (Contact Author)

Assistant Professor of Economics

University of Florida
Department of Economics
Gainesville, FL 32606
United States

HOME PAGE: http://www.jdonna.org/

Pedro Pereira

Autoridade da Concorrência ( email )

1050-138 Lisboa
Portugal

Tiago Pires

University of North Carolina (UNC) at Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC NC 27514
United States

Andre Trindade

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças ( email )

Praia de Botafogo 190/1125, CEP
Rio de Janeiro RJ 22253-900
Brazil

HOME PAGE: http://https://sites.google.com/site/andretrindade/

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