Research
Working Papers
This paper empirically assesses the impact of a discontinuous tax schedule on prices, markups and product assortment in the Brazilian automobile industry. To this end, I estimate a structural, equilibrium model of demand and supply for over a hundred different models and engine sizes of automobiles. With the model estimates of price elasticities and marginal costs I quantify how market power impacts the progressivity of the discontinuous tax schedule. I also examine how firms would reposition their products to avoid the tax and quantify the impact of this repositioning on equilibrium outcomes.
We analyze a hub-and-spoke cartel in the Brazilian automotive fuel industry. Using the court documents and detailed data on the supply chain we uncover the mechanisms used by a cartel of gas stations to solve the obstacles of price coordination. The evidence shows that a subset of distributors (hub) helped the stations (spokes) to overcome coordination problems in three ways: (i) allowing for transfers between geographically dispersed stations (ii) punishing defectors by offering wholesale price discounts to the defector's close competitors; and (iii) reducing the frequency of price changes and asymmetries between stations by diverging sales to the product with stable costs. We argue that the hub benefited from the cartel by being the exclusive supplier during the scheme. We use the synthetic control approach to test whether the cartel was successful in generating higher mark-ups. We find that not only retailers, but wholesalers benefited from the cartel.
Hub-and-Spoke Collusion with Horizontally Differentiated Spokes - with Marco Duarte
A hub-and-spoke cartel, where firms' constraint competition with the help from an upstream supplier or a downstream buyer, is a type of collusive arrangement observed in a variety of industries. The recent literature focuses on information sharing as the main mechanism through which a hub can help spokes to coordinate. We show that when asymmetries in horizontal differentiation across spokes exist, the hub can also use wholesale price discrimination to help spokes achieve higher prices. We present evidence that this mechanism was used during a hub-and-spoke cartel between gas stations and distributors in the Brazilian gasoline industry, and estimate a structural model of demand for gasoline and retail price collusion to quantify the importance of the wholesale price strategy for the stability of the cartel.
Work in Progress
The Dynamics of Demand Stimulus in a Durable Goods Industry: Long-run effects of tax breaks in the Brazilian Automobile Industry - with Leonardo Rezende
Measuring the Returns to Campaign Donations: Evidence from Brazilian Gas Stations - with Marco Duarte
Pricing and Consumption Effects of Safety Regulation in the Automobile Industry