THE ECONOMICS OF PASS-THROUGH WITH PRODUCTION CONSTRAINTS

Dov Rothman, Philipp Tillmann and David Toniatti

Journal of Competition Law and Economics, 2016, vol. 12, issue 2, 279-285

Abstract: This article reviews the implications of production constraints for pass-through. We consider production technology that can only be adjusted in discrete intervals and/or is costly to adjust. We show that, because of production constraints, a firm may not be willing to adjust its level of production in response to small changes in cost. Because price is determined by demand and the quantity produced, production constraints may result in a firm not changing price in response to a change in cost. This result has important implications for antitrust litigation—for example, the extent to which overcharges resulting from anticompetitive conduct upstream in the supply chain are passed through to purchasers downstream in the supply chain.

JEL-codes: K21 L11 L41 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/joclec/nhw004 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:jcomle:v:12:y:2016:i:2:p:279-285.

Access Statistics for this article

Journal of Competition Law and Economics is currently edited by Nicholas Economides, Amelia Fletcher, Michal Gal, Damien Geradin, Ioannis Lianos and Tommaso Valletti

More articles in Journal of Competition Law and Economics from Oxford University Press
Bibliographic data for series maintained by Oxford University Press ().