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.

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21 October 2014     Paper Number CEPDP1310

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This CEP discussion paper is published under the centre's Growth programme.