Seminar
Superstar Products and the Sources of Market Power
-
SeriesPhD Lunch Seminars
-
FieldOrganizations and Markets
-
LocationOnline
-
Date and time
November 17, 2020
13:00 - 14:00
Abstract: This paper studies the sources of market
power using product-level data for narrowly defined markets of the Indian
pharmaceutical industry. I present a measure that proxies for product market
power and identify the marginal effect of its four determinants: wholesale
markup, productivity, retail markup and appeal. Product market power depends
positively on demand-side sources (wholesale markup and appeal) and
negatively on supply-side ones (productivity and retail markup). I define
superstar firms as the largest firms of the industry and superstar products as
the top-selling products of superstar firms. The market power of superstar
products, while higher, depends on the four sources to the same extent as
top-selling products of non-superstar firms. Market power is persistent for the
first products launched in a market and the price cap regulation implemented in
India helped mitigate average market power, but not that of superstar
products. These findings suggest that the global trend in increasing market
power originates within the firm, at the product level.