Alexander MacKay  

RESEARCH

Publications

Rising Markups and the Role of Consumer Preferences
with Hendrik Döpper, Nathan H. Miller, and Joel Stiebale
Accepted, Journal of Political Economy
[SSRN | NBER WP 32739 | Journal Website]
Robert F. Lanzillotti Prize for Best Paper in Antitrust Economics, 2022 We measure the evolution of markups in consumer products across hundreds of product categories from 2006 to 2019. Using detailed data on prices and quantities, we estimate flexible consumer preferences that vary over time, allowing us to evaluate mechanisms that might explain changes in market power.
Estimating Models of Supply and Demand: Instruments and Covariance Restrictions
with Nathan H. Miller
American Economic Journal: Microeconomics, Vol. 17, No. 1 (2025), 238–81.
[Working paper | SSRN | Journal Website] We show how models of firm behavior can help identify demand systems when prices are endogenous. We provide an alternative identification approach to instrumental variables, where we restrict the correlation between unobserved shocks and use all of the information in the model.
Competition in Pricing Algorithms
with Zach Y. Brown
American Economic Journal: Microeconomics, Vol. 15, No. 2 (2023), 109-56.
[Working paper | SSRN | NBER WP 28860 | Journal Website]
American Economic Association AEJ Best Paper Award (AEJ:Micro), 2025 Using high-frequency data, we document new facts about pricing behavior by online retailers. Based on these facts, we model firm behavior when firms compete by choosing algorithms. Compared to simultaneous price-setting behavior, even simple (linear) algorithms support higher prices in competitive equilibrium.
Self-Preferencing at Amazon: Evidence from Search Rankings
with Chiara Farronato and Andrey Fradkin
AEA Papers and Proceedings, Vol. 113 (2023), 239-43.
[Working paper | SSRN | NBER WP 30894 | Journal Website]
We study whether Amazon engages in self-preferencing on its marketplace by favoring its own brands (e.g., Amazon Basics) in search. We find that Amazon branded products are ranked higher in consumer search results than observably similar products.
Recovering Investor Expectations from Demand for Index Funds
with Mark Egan and Hanbin Yang
Review of Economic Studies, Vol. 89, No. 5 (2022), 2559-2599.
[Working paper | SSRN | NBER WP 26608]
We propose a revealed-preference approach to estimate investor expectations of stock market returns. We construct a time-varying distribution of beliefs that allows for heterogeneity among investors. Investors have persistent beliefs that reflect past returns, and a large fraction are contrarians.
Dynamic Pricing Algorithms, Consumer Harm, and Regulatory Response
with Samuel Weinstein
Wash. U. Law Review, Vol. 100, No. 1 (2022), 111–174.
[Working paper | SSRN | Journal Website] We explore the implications of the price effects of competitive high-frequency algorithms for competition policy, and we address the potential for antitrust and regulation.
Contract Duration and the Costs of Market Transactions
American Economic Journal: Microeconomics, Vol. 14, No. 3 (2022), 164-212.
[Working paper | SSRN | Journal Website] I describe a fundamental tradeoff in buyer-seller transactions: shorter contracts select more efficient sellers, but longer contracts avoid additional transaction costs. I provide an empirical model to account for this tradeoff and to estimate transaction costs, which are often unobserved.
The Long-Run Dynamics of Electricity Demand: Evidence from Municipal Aggregation
with Tatyana Deryugina and Julian Reif
American Economic Journal: Applied Economics, Vol. 12, No. 1 (2020), 86–114.
[Working paper | SSRN | NBER WP 23483 | Journal Website] Using a natural experiment and a dynamic model, we estimate large differences between the short-run and the long-run demand elasticities for electricity. These dynamics have important market implications, as they affect investment in new generation and the response to a carbon tax.
Challenges for Empirical Research on RPM
with David Aron Smith
Review of Industrial Organization, Vol. 50, No. 2 (2017), 209–220. We show that the quantity test that was suggested by Posner (1977; 1981) does not identify the change to welfare when demand-enhancing effects are considered generally. We outline other challenges and potential solutions to evaluating the effects of resale price maintenance (RPM).
Bias in Reduced-Form Estimates of Pass-Through
with Nathan H. Miller, Marc Remer, and Gloria Sheu
Economics Letters, Vol. 123, No. 2 (2014), 200–202.
[Working paper] We show that a reduced-form regression of price on costs - the usual approach to estimating pass-through - may not provide a consistent estimate even when cost is a valid instrument. We provide a formal approximation to the bias and the additional conditions needed for consistency.

Working Papers

Vertical Integration and Consumer Choice: Evidence from a Field Experiment
with Chiara Farronato and Andrey Fradkin
We run a field experiment using a custom browser extension to track online shopping behavior on Amazon. We find that, when Amazon brands are not available, consumers buy similar products (along most observable dimensions), search with the same intensity, and do not shift their traffic to other retail platforms. We use a structural model to show that Amazon brands contribute to lower equilibrium prices and higher consumer surplus, though there is heterogeneity across categories.
Markups and Cost Pass-through Along the Supply Chain
with Santiago Alvarez, Alberto Cavallo, and Paolo Mengano
[SSRN]
Using data from a large global manufacturer, we show that total markups—reflecting the difference between retail prices and production costs—are stable from July 2018 through June 2023, despite the significant inflationary period starting in 2022. Along the supply chain, manufacturer and retail markups are negatively correlated.
Algorithmic Coercion with Faster Pricing
with Zach Y. Brown
[SSRN]
We show how a single firm with a high-frequency pricing algorithm can use this advantage to coerce naive (myopic, memoryless, or non-strategic) rivals into higher prices. We show that this coercive equilibrium can yield higher profits for the algorithmic firm than collusion.
Dynamic Pricing, Intertemporal Spillovers, and Efficiency
with Dennis Svartbäck and Anders G. Ekholm
[SSRN]
We study the staggered adoption of a dynamic pricing algorithm. We find that high-frequency pricing led to lower prices and lower demand volatility. Our findings indicate that consumers strategically time their purchases, and we highlight how firms can benefit from this strategic behavior through dynamic pricing that results in lower costs.
What Drives Variation in Investor Portfolios? Estimating the Roles of Beliefs and Risk Preferences
with Mark Egan and Hanbin Yang
Revision requested, Review of Financial Studies
[SSRN | NBER WP 29604]
We document substantial differences in investor behavior across retirement plans over the period 2009-2019. We use a revealed preference approach to show how persistent and predictable differences in beliefs and risk aversion explain investor allocation decisions in the cross section, such as the share of funds allocated to equities.
Consumer Inertia and Market Power
with Marc Remer
Revision requested, RAND Journal of Economics
[SSRN]
Vega Economics Award for Best Paper in Industrial Economics at the 2018 North American Summer Meeting of the Econometric Society We provide an empirical model to estimate the dynamic pricing incentives generated by consumer inertia (habit formation, search, brand loyalty, and switching costs). We show that these dynamic incentives can limit price increases after a merger, compared to the predictions from a static model.
Do Markets Reduce Prices? Evidence from the U.S. Electricity Sector
with Ignacia Mercadal
Revision requested, Journal of Political Economy Microeconomics
[SSRN | CEEPR WP 2022-008] The introduction of competitive markets and market-based prices in the electricity sector were followed by higher wholesale prices and lower generation costs. Wholesale markups increased substantially, highlighting the tradeoff between market power and allocative efficiencies when determining whether to regulate prices.
The Empirical Effects of Minimum Resale Price Maintenance
with David Aron Smith
[SSRN] We estimate the effect of resale price maintenance (RPM) on prices across a broad variety of consumer products. We use the 2007 Leegin Supreme Court decision as a natural experiment. In states where the decision made RPM contracts legally permissible, prices increased.