The Microeconomics of the Pass-Through Effect: An Analysis of the Australian Motor Industry

R.J. Andrew and Brian Dollery ()

Economic Analysis and Policy, 1990, vol. 20, issue 2, 141-148

Abstract: The present paper investigates the pass-through effect in the Australian motor vehicle industry using data on two groups of selected imported motor vehicles facing different degrees of domestic product substitutability for the period January 1984 to November 1988. By examining the extent of “induced” pass-through from local importers to domestic customers in a differentiated market, it is possible to infer the degree of mark-up. The evidence suggests that the extent of pass-through depends on the price elasticity of demand. Pass-through appears to be lower where imported vehicles face close domestic substitutes, and vice versa

Date: 1990
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