Vertical Relations, Pass-through, and Market Definition: Evidence from Grocery Retailing

Justus Haucap, Ulrich Heimeshoff, Gordon Klein, Dennis Rickert and Christian Wey

No 8700, CESifo Working Paper Series from CESifo

Abstract: We examine how different pass-through rates, from input- to final consumer prices, and different vertical contracts affect upstream market definition. Our theory model predicts that, under reasonable conditions, higher pass-through rates lead to definitions of larger upstream markets. Data from grocery retailing is used to quantify the empirical implications of our theoretical result. We find that resale price maintenance leads to larger upstream market definitions than linear pricing models. The reason is that linear pricing contracts are associated with lower pass-through rates under imperfect competition. We therefore advise competition authorities to carefully model vertical market structures, whenever they expect incomplete pass-through to be important.

Keywords: market definition; vertical relations; pass-through; structural models (search for similar items in EconPapers)
JEL-codes: C50 L10 L40 L80 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-com, nep-cta and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Vertical relations, pass-through, and market definition: Evidence from grocery retailing (2021)
Working Paper: Vertical relations, pass-through, and market definition: Evidence from grocery retailing (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8700

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