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Empirical Evidence on the Role of Nonlinear Wholesale Pricing and Vertical Restraints on Cost Pass-Through

Author

Listed:
  • Celine Bonnet

    (Toulouse School of Economics (GREMAQ, INRA))

  • Pierre Dubois

    (Toulouse School of Economics (GREMAQ, INRA, IDEI))

  • Sofia B. Villas Boas

    (University of California)

  • Daniel Klapper

    (Lehrstuhl für Marketing, Goethe University)

Abstract

How a cost shock is passed through to final consumer prices may relate to nominal price stickiness and rigidities, the existence of nonadjustable cost components, strategic markup adjustments, or other contract terms along the supply distribution chain. This paper presents a simple framework to assess the potential role of nonlinear pricing contracts and vertical restraints, such as resale price maintenance or wholesale price discrimination in the supply chain, in explaining the degree of pass-through from upstream cost shocks in the ground coffee category to downstream retail prices. We find that resale price maintenance increases pass-through rate. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Celine Bonnet & Pierre Dubois & Sofia B. Villas Boas & Daniel Klapper, 2013. "Empirical Evidence on the Role of Nonlinear Wholesale Pricing and Vertical Restraints on Cost Pass-Through," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 500-515, May.
    • Handle: RePEc:tpr:restat:v:95:y:2013:i:2:p:500-515
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    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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