DP10366 Mark-up and Cost Dispersion across Firms: Direct Evidence from Producer Surveys in Pakistan

Author(s):	David Atkin, Azam Chaudhry, Shamyla Chaudry, Amit Khandelwal, Eric A Verhoogen
Publication Date:	January 2015
Keyword(s):	costs, markups, soccer balls
JEL(s):	F12, L11, O14
Programme Areas:	Industrial Organization, International Trade and Regional Economics, Development Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=10366

Researchers typically invoke theoretical assumptions to estimate mark-ups. Instead, we directly obtain mark-ups by surveying Pakistani soccer-ball producers. We document six facts: (1) Mark-ups are more dispersed than costs; (2) Mark-ups and costs increase with firm size; (3) The mark-up elasticity with respect to size exceeds the cost elasticity; (4) Costs increase with size because larger firms use higher-quality inputs; (5) Larger firms charge higher mark-ups because they have higher production shares of high-quality balls that carry higher mark-ups, and because they charge higher mark-ups conditional on ball type; (6) Correlations suggest marketing efforts are important for generating higher mark-ups.