Pass-Through by Multi-Product Firms

Abstract

How does cost pass-through to prices depend on the set of products a multiproduct firm owns? Using a structural demand model for the Swedish beer market, we simulate equilibrium cost pass-through for varying counterfactual ownership patterns. We find that a firm with a larger number of products in its portfolio and a higher degree of substitutability among these products adopts a lower pass-through of costs. While the direction of results is robust, our simulations show that the muting effect on passthrough is limited when comparing pass-through by stand-alone firms to pass-through under the actual, moderately concentrated market structure.

Vertical relations, pass-through, and market definition: Evidence from grocery retailing

“…1 Furthermore, we empirically quantify how resale price maintenance clauses affect the manufacturers' ability to pass on upstream supply shocks to consumers. Our study therefore also contributes to the literature on pass-through rate estimation, such as Goldberg and Verboven (2001), Bonnet et al (2013), and Friberg and Romahn (2018). Goldberg and Verboven (2001), for instance, find that double marginalization can serve to dampen cost pass-through.…”

“…We then show how pass-through rates from wholesale to retail prices affect the outcome of a SSNIP market definition analysis. In order to investigate the differential cost pass-through rates across the models, we follow Bonnet et al (2013) and Friberg and Romahn (2018). Having chosen the preferred pricing equilibrium according to our data, e.g., model 11, we can estimate a vector of marginal costs of production and distribution, which we denote by C = (C 1 , ..., C j , ..., C J ).…”

Vertical Relations, Pass-Through, and Market Definition: Evidence from Grocery Retailing

“…In order to investigate the differential cost pass-through rates across the models, we follow Bonnet et al (2013) and Friberg and Romahn (2018). Having chosen the preferred pricing equilibrium according to our data, e.g., model 11, we can estimate a vector of marginal costs of production and distribution, which we denote by…”