On the Endogeneity of Retail Markups in an Equilibrium Analysis: A Control-Function Approach
The endogeneity of retail markups arises due to the correlation between the markups and unobserved costs in the retail pricing equation. This correlations may be a result unobserved product quality affecting both price and markups. Despite inconsistency resulting from markup endogeneity, it has long...
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Western Agricultural Economics Association
2014-08-01
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doaj-b6ac764cf1ec4ff8916d12bed56df8402020-11-25T03:03:58ZengWestern Agricultural Economics AssociationJournal of Agricultural and Resource Economics1068-55022327-82852014-08-0139218820010.22004/ag.econ.186571186571On the Endogeneity of Retail Markups in an Equilibrium Analysis: A Control-Function ApproachVardges HovhannisyanKyle StiegertMarin BozicThe endogeneity of retail markups arises due to the correlation between the markups and unobserved costs in the retail pricing equation. This correlations may be a result unobserved product quality affecting both price and markups. Despite inconsistency resulting from markup endogeneity, it has long been ignored in the equilibrium analysis of retail behavior. We account for retail markup endogeneity using a control-function approach in which controls are derived from empirical evidence in the marketing literature. Furthermore, we adopt three test procedures to evaluate this endogeneity and apply our method in an econometric analysis of retail market behavior in the marketing of yogurt in the United States. The results provide strong statistical evidence for the fact that markup endogeneity has been overlooked, resulting in upward bias in retail markups.https://ageconsearch.umn.edu/record/186571benefit functionsconjectural variationcontrol functionretail conductretail markup endogeneity |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Vardges Hovhannisyan Kyle Stiegert Marin Bozic |
spellingShingle |
Vardges Hovhannisyan Kyle Stiegert Marin Bozic On the Endogeneity of Retail Markups in an Equilibrium Analysis: A Control-Function Approach Journal of Agricultural and Resource Economics benefit functions conjectural variation control function retail conduct retail markup endogeneity |
author_facet |
Vardges Hovhannisyan Kyle Stiegert Marin Bozic |
author_sort |
Vardges Hovhannisyan |
title |
On the Endogeneity of Retail Markups in an Equilibrium Analysis: A Control-Function Approach |
title_short |
On the Endogeneity of Retail Markups in an Equilibrium Analysis: A Control-Function Approach |
title_full |
On the Endogeneity of Retail Markups in an Equilibrium Analysis: A Control-Function Approach |
title_fullStr |
On the Endogeneity of Retail Markups in an Equilibrium Analysis: A Control-Function Approach |
title_full_unstemmed |
On the Endogeneity of Retail Markups in an Equilibrium Analysis: A Control-Function Approach |
title_sort |
on the endogeneity of retail markups in an equilibrium analysis: a control-function approach |
publisher |
Western Agricultural Economics Association |
series |
Journal of Agricultural and Resource Economics |
issn |
1068-5502 2327-8285 |
publishDate |
2014-08-01 |
description |
The endogeneity of retail markups arises due to the correlation between the markups and unobserved costs in the retail pricing equation. This correlations may be a result unobserved product quality affecting both price and markups. Despite inconsistency resulting from markup endogeneity, it has long been ignored in the equilibrium analysis of retail behavior. We account for retail markup endogeneity using a control-function approach in which controls are derived from empirical evidence in the marketing literature. Furthermore, we adopt three test procedures to evaluate this endogeneity and apply our method in an econometric analysis of retail market behavior in the marketing of yogurt in the United States. The results provide strong statistical evidence for the fact that markup endogeneity has been overlooked, resulting in upward bias in retail markups. |
topic |
benefit functions conjectural variation control function retail conduct retail markup endogeneity |
url |
https://ageconsearch.umn.edu/record/186571 |
work_keys_str_mv |
AT vardgeshovhannisyan ontheendogeneityofretailmarkupsinanequilibriumanalysisacontrolfunctionapproach AT kylestiegert ontheendogeneityofretailmarkupsinanequilibriumanalysisacontrolfunctionapproach AT marinbozic ontheendogeneityofretailmarkupsinanequilibriumanalysisacontrolfunctionapproach |
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1724683661786218496 |