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A tractable cost pass-through benchmark

Author

Listed:
  • Bertram Neurohr

    (Oxera)

Abstract

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-Ã -vis more complex approaches.

Suggested Citation

  • Bertram Neurohr, 2016. "A tractable cost pass-through benchmark," Economics Bulletin, AccessEcon, vol. 36(3), pages 1603-1608.
  • Handle: RePEc:ebl:ecbull:eb-16-00399
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2016/Volume36/EB-16-V36-I3-P157.pdf
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    References listed on IDEAS

    as
    1. FRANK VERBOVEN & THEON van DIJK, 2009. "Cartel Damages Claims And The Passing‐On Defense," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 457-491, September.
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    Cited by:

    1. Neurohr, Bertram, 2018. "A merger approach to cartel overcharge analysis," Economics Letters, Elsevier, vol. 168(C), pages 28-30.

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    More about this item

    Keywords

    pass-through; asymmetry; diversion ratios; differentiated products; umbrella effects; asymmetric cost changes;
    All these keywords.

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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