A big reason why is that tastes vary, and some consumers have a preference for Amazon products. Amazon brands add about 5% to consumer surplus in the short run.

This effect varies a lot across categories. We found the largest benefits in acid reducers and batteries.

Using a field experiment, we studied how consumers valued Amazon brands and the extent of self-preferencing by Amazon.

We found that Amazon brands bring benefits to consumers, even though they receive a modest prioritization in search rankings.

We document supply chain markups in the US, the UK, Canada, and Mexico. We find several similarities, though the split of markups between manufacturers and retailers varies across countries.

But: manufacturer and retailer markups move up and down quite a bit. Retail markups fell at the end of 2020 and increased starting in 2022. Manufacturer markups did the opposite.

The movements offset each other, leading to stable total markups.

In the US, total product markups are around 0.67 and relatively flat from July 2018 through June 2023.

Retail prices increase starting in 2022, coinciding with general inflation.

But there is no increase in total markups, i.e., no evidence for "greedflation."

With unique data from a large global manufacturer, we were able to study how product markups vary along the supply chain and over time.

One thing that surprised us: though manufacturer and retail markups bounce up and down, total (manufacturer + retail) markups are stable.

New NBER WP on algorithmic "coercion."

Unlike collusion, coercion can be achieved by a single firm's pricing algorithm.

It can be worse for consumers than collusion.

@nber.org

Coercion can happen even with naive rivals that use simple learning rules. An algorithm that is linear in the rival’s price can lead the rival to set prices well above the competitive level - even when the rival isn’t aware of the algorithm.

The coercive equilibrium can be worse for consumers than the collusive or multi-product monopoly outcome. This is because the algorithmic firm can push a rival’s price above the joint profit maximizing level.

New paper on “Algorithmic Coercion”: We find that a single firm using a pricing algorithm can induce its rivals to set substantially higher prices, even when rivals maximize short-run profits and cannot collude.

I want to take a moment to share some UVA pride: this week, my colleague Emma Harrington received one of the four AEJ Best Paper Awards from the American Economic Association, for her AEJ: Applied paper with Natalia Emanuel on remote work.

As we say down in Cville, Wahoo-wa!

The changing markups have different implications for consumers across the income distribution. One point we emphasize in the paper is that markups are equilibrium objects that are determined by supply and demand, which can make assessing the welfare impacts more nuanced.

We document other trends that seem consistent with a decline in consumer price sensitivity over this period, including less time spent shopping and fewer use of coupons.

We find a declining consumer price sensitivity and falling marginal costs are the biggest drivers of increasing markups. Falling marginal costs do not translate one-for-one to lower prices because the markets are not perfectly competitive.

We use our estimates to evaluate different mechanisms. Though markups increase, real prices increase only slightly. The biggest source of increased markups is falling marginal costs. (Note the scales.)

Forthcoming at the Journal of Political Economy: We find that consumer product markups increased more than 25 percent from 2006 to 2019.

One contribution is an approach to estimate IO-style models at scale, yielding flexible consumer preferences and estimates of marginal costs.

More broadly, our results could be used to teach about the meaning of (biased) OLS coefficients or about interpreting price and quantity data. For instance, we show how the relative variation of quantities and prices can be informative about consumer price sensitivity.