Consumer price sensitivity is not just a pricing parameter, but also a structural force. I show that cross-market variation in demand elasticity shapes firm conduct and, through that channel, market structure. Markets with higher elasticity exhibit lower prices, fewer active brands, greater concentration, and a shift toward Private Labels over National Brands. Interpreting these patterns highlights two mechanisms: for National Brands, manufacturers and retailers jointly determine prices and products under tighter markup constraints; for Private Labels, retailers act unilaterally, using local information to shift toward lower priced options in high elasticity markets. These findings have direct policy implications for merger analysis at both the manufacturer and retailer levels, informing market definition, competitive effects, and the design of targeted policy.
This study investigates the impact of monetary policy shocks, specifically COVID-19 stimulus checks, on Amazon’s pricing behavior. Through a triple-differences (DDD) approach, the study compares price dynamics on Amazon's U.S. platform with Canada as a natural control, aiming to determine if Amazon’s market dominance led to price increases during a period of high demand and financial inflows. By examining Amazon's response relative to third-party sellers and traditional retailers, this chapter sheds light on how industry concentration may amplify price-setting power in economic downturns. The results show that prices rose more in highly concentrated markets, indicating that market power played a significant role in shaping firms’ responses to the policy shock. The findings have implications for understanding the effects of market concentration and suggest a need for regulatory attention to pricing practices during periods of economic intervention.
This paper explores the pricing effects of the 2017 Chewy-PetSmart merger within the pet supplies industry, with a focus on Amazon’s competitive pricing response. Employing a triple-differences (DDD) method, the study analyzes Amazon’s pet product prices in the U.S., using non-pet products and Canadian pet products as controls, to assess how reduced competition influences online pricing. Additionally, the chapter examines potential spillover effects on pricing in traditional retail stores, following the merger of a major retail chain and an e-commerce platform. The results indicate that Amazon’s pet product prices rose significantly after the merger, suggesting that the consolidation led to higher online prices in markets with limited competition. This analysis provides insights into the pricing implications of vertical integration in sectors with strong digital competition, informing policymakers about the merger’s potential impact on market structure and consumer welfare.