European Journal of Law and Economics

, Volume 37, Issue 3, pp 421–437 | Cite as

How consumer information curtails market power in the funeral industry

  • Thierry Blayac
  • Patrice Bougette
  • Christian Montet
Article

Abstract

Based on the French market, the purpose of this article is to show that contrary to common opinion in France about the impossibility of having a deregulation of the business of funeral services without observing abuses of many locally dominant suppliers, improvement in consumer information, along with the entry of a special storing facility service (“chambre funéraire”), imposes enough competitive pressure on the various suppliers, especially the former monopolist. With a Discrete Choice Experiment implemented in Lyon, France, we find evidence that even in this very emotionally charged market, consumer behavior has changed in favor of a better assessment of the different possibilities of services supplied and of their relative prices (e.g., high price elasticities). We also implement simulations in local markets and show that with good consumer information the market power of supposedly dominant firms is far less important than generally believed. Lastly, simulations stress the procompetitive effects of any business setting up a new storing facility.

Keywords

Funeral industry Deregulation Local competition Market power Discrete choice model 

JEL Classification

C25 D12 K23 L43 

References

  1. Boissin, O., & Trompette, P. (2002). Les services funéraires. Du monopole public au marché concurrentiel. Paris: DARES.Google Scholar
  2. Chevalier, J. A., Harrington, D. E., & Scott Morton, F. (2010). Differentiated to death? Working paper. http://strategy.sauder.ubc.ca/schiff/seminars/Scott_Morton_October_1_2010.pdf. Accessed 26 July 2012.
  3. Chevalier, J. A., & Scott Morton, F. (2008). State casket sales restrictions: A pointless undertaking? Journal of Law and Economics, 51(1), 1–23.CrossRefGoogle Scholar
  4. Min. de l’Intérieur, de l’Outre-mer et des collectivités territoriales (2007). Rapport du Conseil national des opérations funéraires 2005–2006. (Direction générale des collectivités locales).Google Scholar
  5. Dobson, P. W., & Waterson, M. (2005). Chain-store pricing across local markets. Journal of Economics and Management Strategy, 14(1), 93–119.CrossRefGoogle Scholar
  6. Ekelund, R. B., & Ford, G. S. (1997). Nineteenth century urban market failure: Chadwick on funeral industry regulation. Journal of Regulatory Economics, 12(1), 27–51.CrossRefGoogle Scholar
  7. Elizalde, J. (forthcoming). A theoretical approach to market definition analysis. European Journal of Law and Economics. doi:10.1007/s10657-011-9231-1.
  8. Federal Trade Commission. (1982). Funeral Rule—16 CFR Part 453. http://www.ftc.gov/bcp/rulemaking/funeral. Accessed 26 July 2012.
  9. Harrington, D. E. (2007). Markets: Preserving funeral markets with ready-to-embalm laws. Journal of Economic Perspectives, 21(4), 201–216.CrossRefGoogle Scholar
  10. Harrington, D. E., & Krynski, K. J. (2002). The effect of state funeral regulations on cremation rates: Testing for demand inducement in funeral markets. Journal of Law and Economics, 45(1), 199–225.CrossRefGoogle Scholar
  11. INSEE. (2012). Statistiques d’état civil sur les décès en 2010. Insee Résultats, 126, February 2012. http://www.insee.fr/fr/themes/document.asp?reg_id=0&ref_id=sd20103. Accessed 4 September 2012.
  12. Louviere, J. J., & Hensher, D. A. (1983). Using discrete choice models with experimental design data to forecast consumer demand for a unique cultural event. Journal of Consumer Research, 10(3), 348–361.CrossRefGoogle Scholar
  13. McChesney, F. S. (1990). Consumer ignorance and consumer protection law: Empirical evidence from the FTC funeral rule. Journal of Law & Politics, 7, 1–72.Google Scholar
  14. McMillan, J. (2002). Reinventing the bazaar: A natural history of markets (1st ed.). New York: W. W. Norton & Company.Google Scholar
  15. Motta, M. (2004). Competition policy: Theory and practice. Cambridge: Cambridge University Press.Google Scholar
  16. Parcel, L. (2008). Stiff competition: Vertical relationships in cremation services. SIEPR Discussion Paper 07-041, Stanford Institute for Economic Policy Research.Google Scholar
  17. Rubinfeld, D. L. (2008). Quantitative methods in antitrust. In Issues in competition law and policy (Vol. 1, pp. 723–742). ABA Section of Antitrust Law.Google Scholar
  18. Shleifer, A. (2005). Understanding regulation. European Financial Management, 11(4), 439–451.CrossRefGoogle Scholar
  19. Trompette, P. (2008). Le marché des défunts. Paris: Presses de Sciences Po.Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  • Thierry Blayac
    • 1
  • Patrice Bougette
    • 2
  • Christian Montet
    • 3
  1. 1.Université Montpellier 1 and LAMETAMontpellier cedex 2France
  2. 2.Université de Nice Sophia-Antipolis and GREDEG CNRSNiceFrance
  3. 3.Université de la Polynésie française, GDI, Université Montpellier 1, and LAMETAPunaauiaFrench Polynesia

Personalised recommendations