Market Power and Price Competition in the Italian Wine Market

Abstract

The analysis explores the Italian wine sector and provides information on the industry structure and its conduct in terms of market power and price competition. In order to depict pricing behavior and market power measures, the Bertrand‐Nash equilibrium is estimated through brand‐level demand relative to the first 9 wine brands in terms of market share. The method used consists of a censored QUAIDS, chosen for its flexibility. The results consist of demand price responsiveness and product sostituibility measures. Estimates allow the calculation of Lerner Indexes for each brand as well as mark‐ups, the ability of a firm to push its prices above marginal costs. With those measures, policy and industry implications are drawn in terms of targeted actions in order to increase consumers’ welfare and brand loyalty indicators.

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