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Pass-Through by Multi-Product Firms

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  • Richard Friberg
  • André Romahn

Abstract

How does cost pass-through to prices depend on the set of products a multi-product 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 pass-through is limited when comparing pass-through by stand-alone firms to pass-through under the actual, moderately concentrated market structure.

Suggested Citation

  • Richard Friberg & André Romahn, 2018. "Pass-Through by Multi-Product Firms," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 25(2), pages 265-295, May.
    • Handle: RePEc:taf:ijecbs:v:25:y:2018:i:2:p:265-295
    DOI: 10.1080/13571516.2018.1426411
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    Cited by:

    1. Antoniades, Alexis & Clerides, Sofronis & Xu, Mingzhi, 2023. "Multi-product firm price and variety response to firm-specific cost shocks," International Journal of Industrial Organization, Elsevier, vol. 90(C).
    2. Haucap, Justus & Heimeshoff, Ulrich & Klein, Gordon J. & Rickert, Dennis & Wey, Christian, 2021. "Vertical relations, pass-through, and market definition: Evidence from grocery retailing," International Journal of Industrial Organization, Elsevier, vol. 74(C).
    3. repec:mcm:deptwp:2021-10 is not listed on IDEAS

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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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