Exploiting a Cost Advantage and Coping with a Cost Disadvantage
This paper provides an empirical investigation of how firms with cost advantages (cost disadvantages) exploit (cope with) their advantages (disadvantages) through their pricing behavior. Guided by microeconomic theory and insights from the industrial organization literature, we develop testable implications about the effect of industry structure and firm-specific characteristics on the pass-through elasticity: The rate at which changes in a firm's cost relative to competitors translates into changes in the firm's price relative to competitors. We test these implications using data from the PIMS Competitive Strategy database. The results indicate that a firm's pass-through elasticity systematically depends on whether the firm operates in a commodity or noncommodity industry, the firm's capacity utilization, and its cost and quality position in its industry. The pass-through elasticity is also shown to depend in a nonlinear way on market concentration.
Volume (Year): 47 (2001)
Issue (Month): 2 (February)
|Contact details of provider:|| Postal: |
Web page: http://www.informs.org/Email:
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:47:y:2001:i:2:p:221-235. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.