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Cost pass-through and inverse demand curvature in vertical relationships with upstream and downstream competition

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  • Adachi, Takanori
  • Ebina, Takeshi

Abstract

This paper provides two characterizations of the retailer’s markup relative to the manufacturer’s markup in vertical relationships with homogeneous manufacturers and homogeneous retailers. We first show that retailer’s relative markup is equal to the ratio of the retail pass-through to the wholesale pass-through, multiplied by the number of manufacturers relative to the number of retailers. We then provide its expression in terms of the inverse demand curvature.

Suggested Citation

  • Adachi, Takanori & Ebina, Takeshi, 2014. "Cost pass-through and inverse demand curvature in vertical relationships with upstream and downstream competition," Economics Letters, Elsevier, vol. 124(3), pages 465-468.
  • Handle: RePEc:eee:ecolet:v:124:y:2014:i:3:p:465-468
    DOI: 10.1016/j.econlet.2014.07.008
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Gaudin, Germain, 2016. "Pass-through, vertical contracts, and bargains," Economics Letters, Elsevier, vol. 139(C), pages 1-4.
    2. Michal Fabinger & E. Glen Weyl, 2016. "The Average-Marginal Relationship and Tractable Equilibrium Forms," CIRJE F-Series CIRJE-F-1028, CIRJE, Faculty of Economics, University of Tokyo.
    3. Yin Chu & J. Scott Holladay & Jacob LaRiviere, 2017. "Opportunity Cost Pass-through from Fossil Fuel Market Prices to Procurement Costs of the U.S. Power Producers," Working Papers 2017-02, University of Tennessee, Department of Economics.
    4. Durevall, Dick, 2017. "Cost Pass-Through in the Swedish Coffee Market," Working Papers in Economics 697, University of Gothenburg, Department of Economics.
    5. E. Weyl & Michal Fabinger, 2015. "A Tractable Approach to Pass-Through Patterns," 2015 Meeting Papers 747, Society for Economic Dynamics.
    6. Takanori Adachi & Michal Fabinger, 2017. "Multi-Dimensional Pass-Through, Incidence, and the Welfare Burden of Taxation in Oligopoly," CIRJE F-Series CIRJE-F-1040, CIRJE, Faculty of Economics, University of Tokyo.
    7. Takanori Adachi & Muhammad Michal Fabinger, 2017. "Multi-Dimensional Pass-Through, Incidence, and the Welfare Burden of Taxation in Oligopoly," CIRJE F-Series CIRJE-F-1040, CIRJE, Faculty of Economics, University of Tokyo.
    8. Durevall, Dick, 2017. "Cost Pass-Through in the Swedish Coffee Market," HUI Working Papers 120, HUI Research.
    9. M. Shahe Emran & Dilip Mookherjee & Forhad Shilpi & M. Helal Uddin, "undated". "Do Consumers Benefit from Supply Chain Intermediaries? Evidence from a Policy Experiment in Edible Oils Market in Bangladesh," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-273, Boston University - Department of Economics.

    More about this item

    Keywords

    Cost pass-through; Inverse demand curvature; Cournot competition;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • 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

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