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Impact of supply risk on cost pass-through

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  • Junhyun Bae
  • Ji-Hung (Ryan) Choi

Abstract

We study the cost pass-through rate in a supply chain setting where a buying firm sources from either a single unreliable supplier or dual unreliable suppliers. Numerous papers studying cost pass-through rates have assumed that supply is always certain and ample, which is not usually the case in practice. We find that the cost pass-through rate should depend on the supply uncertainty, its risk-sharing levels with upstream suppliers, and different sourcing strategies. In particular, the cost pass-through rate increases in supply risk-sharing levels, but decreases under single sourcing, compared to dual sourcing.

Suggested Citation

  • Junhyun Bae & Ji-Hung (Ryan) Choi, 2025. "Impact of supply risk on cost pass-through," Applied Economics Letters, Taylor & Francis Journals, vol. 32(16), pages 2349-2353, September.
    • Handle: RePEc:taf:apeclt:v:32:y:2025:i:16:p:2349-2353
    DOI: 10.1080/13504851.2024.2332585
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