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Market power in distribution and pass‐through for consumers and producers

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  • Joseph Francois
  • Miriam Manchin

Abstract

We examine the differential pass‐through of import prices into consumer and producer prices. We develop a framework with distribution costs and distribution market power. We then examine pass‐through from import prices to consumer and producer prices in the euro area using the U.S. import price as instrument. We find that pass‐through rates to producer prices are more sensitive to changes in distribution margins than pass‐through to consumer prices. Furthermore, only a portion of import price changes translate into domestic price changes limiting potential consumer benefits from tariff liberalization, with market power in distribution services being one important factor reducing pass‐through.

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  • Joseph Francois & Miriam Manchin, 2019. "Market power in distribution and pass‐through for consumers and producers," Review of International Economics, Wiley Blackwell, vol. 27(1), pages 290-312, February.
  • Handle: RePEc:bla:reviec:v:27:y:2019:i:1:p:290-312
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    File URL: https://doi.org/10.1111/roie.12376
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