According to standard economic wisdom, fixed costs should not matter for pricing decisions. However, outside economics, it is widely accepted that firms need to increase their prices after a fixed cost rise. In this note, we show that a liquidity-constrained firm that maximizes lifetime profits...

Embedding the efficient bargaining model into the R. Hall (1988) approach for estimating price-cost margins shows that both imperfections in the product and labor markets generate a wedge between factor elasticities in the production function and their corresponding shares in revenue. This...

This paper provides evidence from a natural experiment on the importance of tacit knowledge that workers have about firms' intangible assets for competition in product and labor markets. First, evidence is presented on product and labor market imperfections across firms in manufacturing and...

How do customer loyalty programs create switching costs? We estimate the demand effects of tier levels within a frequent flier program by exploiting discrete tier thresholds. We have two main results. First, members increase demand to reach a higher tier level just before the end of the calendar...

This paper tests the pro-competitive effect of trade in the product and labour markets of UK manufacturing sectors between 1988 and 2003 using a two-stage estimation procedure. In the first stage, we use data on 9820 firms from twenty manufacturing sectors to simultaneously estimate mark-up and...