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Market Structure and Cost Pass-Through in Retail

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  • Gee Hee Hong
  • Nicholas Li
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    Abstract

    We examine the extent to which vertical and horizontal market structure can together explain incomplete retail pass-through. To answer this question, we use scanner data from a large U.S. retailer to estimate product level pass-through for three different vertical structures: national brands, private label goods not manufactured by the retailer and private label goods manufactured by the retailer. Our findings emphasize that accounting for the interaction of vertical and horizontal structure is important in understanding how market structure affects pass-through, as a reduction in double-marginalization can raise pass-through directly but can also reduce it indirectly by increasing market share.

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    Bibliographic Info

    Paper provided by Bank of Canada in its series Working Papers with number 13-5.

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    Length: 47 pages
    Date of creation: 2013
    Date of revision:
    Handle: RePEc:bca:bocawp:13-5

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    Keywords: Inflation and prices; Transmission of monetary policy;

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    Cited by:
    1. Adachi, Takanori & Ebina, Takeshi, 2014. "Double marginalization and cost pass-through: Weyl–Fabinger and Cowan meet Spengler and Bresnahan–Reiss," Economics Letters, Elsevier, vol. 122(2), pages 170-175.

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