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Demand Curvature and Pass-Through in Differentiated Oligopoly

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  • Paul S. Koh

Abstract

This paper studies cost pass-through in differentiated-product oligopoly. I derive a general representation of the pass-through matrix that decomposes equilibrium price responses into the roles of demand curvature, substitution, and multiproduct ownership. This extends the classic insight in single-product monopoly to multiproduct settings in which diversion and ownership also matter. I then develop a tractable first-order approximation that yields a sufficient-statistics characterization for empirically relevant demand systems. Finally, I characterize the small-share limit and show how common demand specifications impose tail restrictions that shape pass-through. The results provide a practical framework for applied work on tax incidence, merger analysis, and related questions in imperfect competition.

Suggested Citation

  • Paul S. Koh, 2026. "Demand Curvature and Pass-Through in Differentiated Oligopoly," Papers 2604.21423, arXiv.org.
    • Handle: RePEc:arx:papers:2604.21423
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    References listed on IDEAS

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    1. Aaron B. Flaaen & Ali Hortaçsu & Felix Tintelnot & Nicolás Urdaneta & Daniel Xu, 2025. "Who Pays for Tariffs Along the Supply Chain? Evidence from European Wine Tariffs," NBER Working Papers 34392, National Bureau of Economic Research, Inc.
    2. Erich Muehlegger & Richard L. Sweeney, 2022. "Pass-Through of Own and Rival Cost Shocks: Evidence from the U.S. Fracking Boom," The Review of Economics and Statistics, MIT Press, vol. 104(6), pages 1361-1369, November.
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