Competition in a Spatially-Differentiated Product Market with Negotiated Prices

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ID: 317763
2026
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Abstract
Abstract In many markets, buyers make discrete choices between differentiated products and negotiate prices that are specific to the choice. We develop for estimation a model for this class of markets which is consistent with non-cooperative models of bargaining between a buyer and competing sellers. We show that when the buyer's utility has GEV disturbances, the model has a tractable likelihood function which can be used with transaction-level data giving the selected product and its price. We estimate the model using data from the UK brick industry and use it to measure market power and analyze mergers. We analyze how spatial differentiation and ownership concentration affect the distribution of market power across transactions. In counterfactuals we find that switching from individually-negotiated to uniform pricing causes markups, and merger price effects, to increase on average but to decrease for a minority of transactions.
Reference Key
openalex_W3104382177 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Walter Beckert, Howard W. Smith, Yuya Takahashi
Journal The Review of Economic Studies
Year 2026
DOI
10.1093/restud/rdag064
URL
https://doi.org/10.1093/restud/rdag064
Keywords Keywords not found

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