|
| |
| Bertram Neurohr |
| |
| ''A tractable cost pass-through benchmark'' |
| ( 2016, Vol. 36 No.3 ) |
| |
| |
| Under the assumptions of constant marginal costs, linear demand and symmetric cross-price effects, the equilibrium rates at which firms pass cost changes through to prices can be calculated from diversion ratios. The resulting pass-through benchmark makes it possible to capture market asymmetries and can easily be extended to cover not just the conventional cases of firm-specific and industrywide cost changes but also cases where some but not all firms face a cost change and where the degree of exposure to the cost change varies between firms. As such the benchmark is more accurate and adaptable than existing benchmarks and also has a number of practical advantages vis-à-vis more complex approaches. |
| |
| |
| Keywords: pass-through, asymmetry, diversion ratios, differentiated products, umbrella effects, asymmetric cost changes |
JEL: L5 - Regulation and Industrial Policy: General
L4 - Antitrust Issues and Policies: General |
| |
| Manuscript Received : May 18 2016 | | Manuscript Accepted : Aug 24 2016 |
|
