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Home | Events Archive | A Tale of Two Markups: Reconciling Supply- and Demand-Based Estimates
Seminar

A Tale of Two Markups: Reconciling Supply- and Demand-Based Estimates

  • Location
    Erasmus University Rotterdam, Campus Woudestein, Polak 2-04
    Rotterdam
  • Date and time

    April 07, 2025
    11:30 - 12:30

Abstract

Combining sales and price scanner data with firm balance sheet data on variable input expenditures and revenues, we estimate firm-level price markups using two widely used methods, based on production function estimation and demand system estimation. Despite their theoretical equivalence in many general equilibrium frameworks, the two methods result in markup estimates negatively correlated across firms. Considering a demand system that allows for household heterogeneity and its impact on market shares, we show that resulting demand-based markups become more positively correlated with supply-based markups estimated with flexible production functions and firm-specific prices.