retail, wholesale and total margins obtained from this estimation (remind that for private labels
total margins are equal to retail margin by convention and thus on average total margins are lower
than the sum of average retail and wholesale margins). In Model 4, we assume that wholesale prices
are equal to the marginal cost of production. It corresponds to the case of equation (19). Model 5
is the case where the wholesale prices are such that the retailers’ margins are zero. Finally, models
6 and 7 are the case of two part tariffs contracts without resale price maintenance either without
endogenous buyer power (model 6) or with endogenous buyer power (model 7).
|
Price-Cost Margins (% of retail price pjt) |
Mineral Water |
Spring Water | |||
|
Mean |
Std. |
Mean |
Std. | ||
|
Linear Pricing (Double Marginalization) | |||||
|
Model 1 |
Retailers |
17.04 |
2.24 |
36.26 |
7.14 |
|
Manufacturers |
23.02 |
3.77 |
43.72 |
6.16 | |
|
Total |
36.23 |
8.17 |
58.12 |
27.43 | |
|
Two part Tariffs with RPM | |||||
|
Model 2 |
General wholesale prices (wjt) with restriction (22) | ||||
|
Retailers |
33.82 |
23.44 |
30.45 |
35.95 | |
|
Manufacturers |
12.44 |
25.77 |
57.14 |
49.76 | |
|
Total |
44.19 |
11.13 |
59.03 |
27.64 | |
|
Model 3 |
No wholesale price discrimination (wb(j∖t) with restriction (22) | ||||
|
Retailers |
28.15 |
33.74 |
22.05 |
26.16 | |
|
Manufacturers |
21.13 |
33.61 |
75.13 |
33.61 | |
|
Total |
45.76 |
12.04 |
59.62 |
28.49 | |
|
Model 4 |
Manufacturer marginal cost pricing (w = μ) |
66.05 |
19.27 |
77.14 |
40.82 |
|
Model 5 |
Zero retail margin (p = w + c) |
25.70 |
4.96 |
44.03 |
15.35 |
|
Two-part Tariffs without RPM | |||||
|
Exogenous Retail Buyer Power | |||||
|
Model 6 |
Retailers |
17.04 |
2.24 |
36.26 |
7.14 |
|
Manufacturers |
19.22 |
3.96 |
26.65 |
4.23 | |
|
Total______________________________________ |
33.06 |
6.77 |
49.58 |
18.75 | |
|
Endogenous Retail Buyer Power | |||||
|
Model 7 |
Retailers |
17.04 |
2.24 |
36.26 |
7.14 |
|
Manufacturers |
22.66 |
5.50 |
54.10 |
7.32 | |
|
Total |
35.93 |
8.47 |
63.31 |
32.60 | |
|
Table 4 : Estimation Results of Price-Cost Margins (averages by groups) | |||||
After estimating the different price-cost margins for the models considered, one can recover the
total marginal cost Cjt and then estimate cost equations allowing to implement the non nested tests
across the different models. For such tests, we specify cost equations as follows, for h = 1,..., 7 :
ɪn cjt = ωb(j) + ωr(j) + wjt^g + In ηtjt
30