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CEP Discussion Paper
The Impact of Maximum Markup Regulation on Prices
Christos Genakos, Pantelis Koutroumpis and Mario Pagliero
October 2014
Paper No' CEPDP1310:
Full Paper (pdf)

JEL Classification: L0; L1; L4; L5

Tags: markup regulation; focal point; collusion; ex-post policy evaluation

Markup regulation is a common yet understudied type of regulation. We analyze the repeal of maximum wholesale and retail markup regulation in an oligopolistic and vertically non-integrated market. By comparing the prices of products affected by regulation before and after the policy change and using unregulated products as a control group, we find that abolishing regulation led to a significant decrease in both retail and wholesale prices. The results provide indirect but consistent evidence that markup ceilings provided a focal point for collusion among wholesalers.