DP10243 The Impact of Maximum Markup Regulation on Prices
We study the repeal of a regulation that imposed maximum wholesale and retail markups for all but five fresh fruits and vegetables. We compare the prices of products affected by regulation before and after the policy change and use the unregulated products as a control group. We find that abolishing regulation led to a significant decrease in both retail and wholesale prices. However, markup regulation affected wholesalers directly and retailers only indirectly. The results are consistent with markup ceilings providing a focal point for collusion among wholesalers.