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

  • Bonnet, Céline
  • Dubois, Pierre
  • Villas Boas, Sofia B.

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.

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 565.

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Date of creation: Jul 2009
Date of revision: Sep 2011
Publication status: Published in The Review of Economics and Statistics, mai 2013, p.�500-515.
Handle: RePEc:ide:wpaper:21003
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  1. Villas-Boas, Sofia & Hellerstein, Rebecca, 2004. "Identification of Supply Models of Retailer and Manufacturer Oligopoly Pricing," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt92x5f4j3, Department of Agricultural & Resource Economics, UC Berkeley.
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  7. Campa, Jose M. & Goldberg, Linda S. & Gonzalez-Minguez, Jose M., 2005. "Exchange-rate pass-through to import prices in the euro area," IESE Research Papers D/609, IESE Business School.
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  9. repec:bla:restud:v:75:y:2008:i:1:p:165-199 is not listed on IDEAS
  10. José Manuel Campa & Linda S. Goldberg, 2005. "Exchange Rate Pass-Through into Import Prices," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 679-690, November.
  11. Sofia Berto Villas-Boas, 2009. "An empirical investigation of the welfare effects of banning wholesale price discrimination," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 20-46.
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  21. Hellerstein, Rebecca & Villas-Boas, Sofia B., 2010. "Outsourcing and Pass-Through," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt8098p5nq, Department of Agricultural & Resource Economics, UC Berkeley.
  22. McFadden, Daniel L., 1984. "Econometric analysis of qualitative response models," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 24, pages 1395-1457 Elsevier.
  23. David R. Bell & Jeongwen Chiang & V. Padmanabhan, 1999. "The Decomposition of Promotional Response: An Empirical Generalization," Marketing Science, INFORMS, vol. 18(4), pages 504-526.
  24. Emi Nakamura & Dawit Zerom, 2009. "Accounting for Incomplete Pass-Through," NBER Working Papers 15255, National Bureau of Economic Research, Inc.
  25. Koerner, Julia, 2002. "The Dark Side of Coffee Market Power in the German Market for Roasted Coffee," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24969, European Association of Agricultural Economists.
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  27. repec:bla:restud:v:74:y:2007:i:2:p:625-652 is not listed on IDEAS
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