Working Papers

Who Is in the Driver's Seat? 

Markups, Markdowns, and Profit Sharing in the Car Industry | Job Market Paper | Link 

Recipient of the Andrea Lofaro Prize for the Best Papers on Industrial Organization written by Young Researchers from the Centre for Competition Economics 


I develop a framework for markup and markdown estimation that allows for profit sharing along value chains without making assumptions on conduct between vertically related firms. I derive the conditions under which the markup and markdown estimates relate to the firms’ equilibrium bargaining weights. To account for vertical and horizontal product differentiation in the production function estimation, I include plant-level prices and employ car characteristics as demand-based quality controls. Between 2002 and 2018, the European car manufacturers’ margins on their input and output markets combined were stable around 10% to 15% on average. The manufacturers’ share of the margin on the input market, however, depends on the car segments in which they produce. The suppliers’ share depends negatively on the variety of their product portfolio and depends positively on their relationship intensity to car manufacturers. The analysis shows that the manufacturers’ bargaining weights decreased during crisis years, such as the financial crisis in 2007 or the dieselgate scandal in 2015. 

Work in Progress

Product Characteristics and Hedonic Prices in Production Function Estimation

Innovation and Contracting - How Bargaining Shaped the Car Industry

with Jacopo Gambato


We evaluate whether automotive part suppliers strategically use product innovation to increase their margin when bargaining with car manufacturers. We argue that the industry-specific two-stage bargaining procedure between car makers and their suppliers is a crucial driver of the industry’s extensive and well-documented R&D investment. In 2021 alone, the European automotive industry invested roughly 60 billion euro, securing the number one position in terms of R&D investment across industries, surpassing even the pharmaceutical sector. We derive predictions based on a theoretical model and take them to a structural estimation framework.

Competing for Market Entry - Regional Tax Incentives and Market Distortions

with Debashrita Mohapatra 


We evaluate market entry distortions through regional trade tax variation in Germany. Each of the roughly eleven thousand municipalities in Germany sets its trade tax multiplier that applies to local companies. The multiplier yields a tax income that is proportional to the firms’ revenues and provides substantial incentives for the firms’ location choices. A prominent example is the city of Mainz, where the Biontech headquarters are located. As the Biontech/Pfizer Corona vaccine increased in sales, Mainz reached a peak tax income. As a response, the city decreased the tax multiplier to increase firm entry, leading to neighboring cities fearing that their incumbents relocate to Mainz. In this paper, we compare the observed market outcomes with the social planner solution and evaluate whether the regional taxes are set efficiently.

An Empirical Evaluation of EU Merger Decisions

with Christoph Carnehl and Konrad Stahl


We evaluate the impact of major European mergers on consumer surplus. Mergers can yield conflicting effects for consumers: potentially raising prices because of increased market concentration while also generating efficiency gains. Which of these effects dominates and whether mergers are beneficial for consumers is ambiguous. We construct an extensive database that contains balance sheet information, market shares, main competitors, and innovation activities of all firms involved in mergers that are notified to the European Commission within the time frame 2002-2020. Using this data, we evaluate existing methods for merger analysis and assess the impact of European merger policy on consumer surplus based on a sufficient statistics approach.