* Product Bundling, Joint Markups and Trade liberalization (Job Market Paper) Current Version Here
Abstract: Product bundling is a frequent practice that multi-product firms use to increase firm-level profits. This paper examines how product bundling affects a firm’s markups at various levels in international trade. Joint pricing decisions for product bundling pose a challenge for previous methods in estimating markups. Utilizing the linkages across prices in the firm profit maximization problem, I propose a method to estimate transaction-level markups incorporating multi-product firms’ decisions to bundle products. Focusing on Chinese exporters, multi-product firms that bundle products achieve markups that are approximately 30% higher than firms without product bundling. The markup premiums that bundling firms enjoy have been partially driven out since competition has increased due to China’s WTO accession.
Presented at: WEAI 97th Annual Conference, Young Economist Symposium 2022 (Yale), Southern Economic Association 92nd Annual Meeting (Fort Lauderdale, scheduled)