Liquidity constraints and the cyclical behavior of markups
Article Abstract:
An alternative approach to counter-cyclical markups with imperfect competition and capital market imperfections as economic indicators is considered and differentiated from a related collusion model. It is shown that interpretation presents problems for settings where markups and a larger number of liquidity-constrained firms are present. The alternative method avoids markup complications by evaluating firm price behavior within specific industries and comparing them across liquidity- and non-liquidity constrained firms.
Publication Name: American Economic Review
Subject: Economics
ISSN: 0002-8282
Year: 1995
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Capital-market imperfections and countercyclical markups: theory and evidence
Article Abstract:
A model of countercyclical markups of price over marginal cost based on defects of a capital market is developed. During recessions, companies which have low liquidity, increase their short-term profits by increasing prices to reduce their investments in market share. Investigations indicate that this is true for the supermarket industry. During regional and macroeconomic recessions, more financially-limited supermarket chains increase their prices compared to less financially-limited chains.
Publication Name: American Economic Review
Subject: Economics
ISSN: 0002-8282
Year: 1996
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Capital structure and product-market competition: empirical evidence from the supermarket industry
Article Abstract:
The association between the capital structure of a firm and product-market competition in the supermarket industry was analyzed by examining data from 85 Metropolitan Statistical Areas in 1985 and 1991. Two major developments were discovered. First was that a leveraged buyout (LBO) will increase the stock prices of supermarket chains in a certain area, and secondly, that chains were inclined to expand in markets in which firms had undertaken LBOs.
Publication Name: American Economic Review
Subject: Economics
ISSN: 0002-8282
Year: 1995
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