Deregulating Down to Six-Feet-Under? An Econometric Analysis of a Local Funeral Market

This paper provides an assessment of the competitive effects of deregulation on a local market that exhibits typical competitive conditions in the French funeral industry. Using a nested logit model, we first show that demand for funeral services is characterized by relatively high price elasticities, which is contrary to widely shared beliefs. Various simulations of price increases by the leader, using a kind of SSNIP test, show that its market power is lower than expected. Our study of the competitive role of `funeral rooms' and of new entries in this type of service suggests that the remaining issues concerning possible improvements of the competitive process are linked with current regulations, especially those surrounding the management of funeral rooms.