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Market Structure and Cost Pass-Through in Retail

  • Gee Hee Hong
  • Nicholas Li
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    We examine the extent to which vertical and horizontal market structure can together explain incomplete retail pass-through. To answer this question, we use scanner data from a large U.S. retailer to estimate product level pass-through for three different vertical structures: national brands, private label goods not manufactured by the retailer and private label goods manufactured by the retailer. Our findings emphasize that accounting for the interaction of vertical and horizontal structure is important in understanding how market structure affects pass-through, as a reduction in double-marginalization can raise pass-through directly but can also reduce it indirectly by increasing market share.

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    File URL: http://www.bankofcanada.ca/wp-content/uploads/2013/03/wp2013-05.pdf
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    Paper provided by Bank of Canada in its series Staff Working Papers with number 13-5.

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    Length: 47 pages
    Date of creation: 2013
    Date of revision:
    Handle: RePEc:bca:bocawp:13-5
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