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Focal pricing constraints and pass-through of input cost changes

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  • Arduini, Francesca

Abstract

Pass-through rates are relevant in a variety of contexts, such as estimating antitrust damages. It is often asserted that focal pricing, the practice of charging only special prices, e.g. ending in 9s, reduces the degree of pass-through in an industry. This claim has had serious consequences; for example, it has contributed to the dismissal of high-profile antitrust cases. However, it is not grounded in economic theory or evidence. I prove that, in a simple but general framework, expected pass-through is unchanged by the presence of focal pricing constraints. Therefore, the fact that an industry is characterised by focal pricing constraints does not entail that it will also be characterised by a low pass-through rate.

Suggested Citation

  • Arduini, Francesca, 2026. "Focal pricing constraints and pass-through of input cost changes," International Journal of Industrial Organization, Elsevier, vol. 107(C).
    • Handle: RePEc:eee:indorg:v:107:y:2026:i:c:s0167718726000408
    DOI: 10.1016/j.ijindorg.2026.103288
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