Intertemporal Price Discrimination in Consumer Packaged Goods (JMP)
Temporary price promotions, or sales, are common in many markets. Using retail scanner data, I find that manufacturers, not retailers, control the timing of sales, while retailers exercise some control over the magnitude of the price decrease. I also find that observed sale policy is more consistent with intertemporal price discrimination than with other explanations. I develop an empirically tractable model that is consistent with these facts and use it to show that sales generally improve consumer surplus and total welfare relative to static pricing. I also find that the effects of market concentration on sales are ambiguous; firms must have some degree of market power for sales to occur, but there are also scenarios when an increase in market power can decrease the occurrence of sales or eliminate them entirely.
A Price Leadership Model for Merger Analysis (joint with Nathan Miller, Gloria Sheu, and Matthew Weinberg)
We provide a methodology to simulate the coordinated effects of a proposed merger using data commonly available to antitrust authorities. The model follows the price leadership structure in Miller, Sheu, and Weinberg (2021) in an environment with logit or nested logit demand. The model calibration leverages profit margin data to separately identify the extent of coordinated pricing from marginal costs. Using this framework, we demonstrate how mergers can shift incentive compatibility (IC) constraints and thereby lead to adverse competitive effects. The IC constraints also affect the extent to which cost efficiencies and divestitures mitigate competitive harms.
Price-Fixing Allegations in the Canned Tuna Industry: A Look at the Data (joint with Minhae Kim, Nathan Miller, Marc Remer, and Matthew Weinberg), forthcoming at Antitrust Bulletin
In December of 2014, Thai Union, the parent company of Chicken of the Sea canned tuna announced that it had reached an agreement to acquire Bumble Bee tuna from Lion Capital. In the course of standard merger review, the Department of Justice subpoenaed the merging parties as well as the parent company of StarKist in order to investigate possible collusion among the major producers of canned tuna. This led to several class action lawsuits and a criminal conviction for price fixing. This paper describes how these firms were alleged to have colluded and uses retail scanner data to document how prices and promotional activity changed while the cartel was in operation. Avenues for future research are discussed.
The Curious Case of the Canned Tuna Cartel: An Economic Analysis (joint with Minhae Kim, Nathan Miller, Marc Remer, and Matthew Weinberg)
We study a case of price-fixing between the three main suppliers of canned tuna in the United States: Bumble Bee, Chicken of the Sea, and StarKist. These firms pleaded guilty to collusion after having their cartel discovered during a standard merger review by the US Department of Justice. Our analysis demonstrates that an inability to maintain coordination and supra-competitive prices may have led to a merger between cartel members. Reduced-form analysis shows that the producers increased prices on three separate occasions. However, high prices often fell following attempts to coordinate. We then estimate a dynamic demand model and impose structural supply-side restrictions to more fully understand the impact of the cartel. We find that the producers did increase prices above competitive levels for periods of time. However, all three suppliers were unable to implement or sustain these increases simultaneously. As such, coordination was unprofitable for two of the three producers.
A Simple Model of Float Management by Mobile Money Agents (joint with John Rust)
Intertemporal Price Discrimination in the Market for Smartphones