Pass-Through by Multi-Product Firms

Richard Friberg and André Romahn

International Journal of the Economics of Business, 2018, vol. 25, issue 2, 265-295

Abstract: How does cost pass-through to prices depend on the set of products a multi-product firm owns? Using a structural demand model for the Swedish beer market, we simulate equilibrium cost pass-through for varying counterfactual ownership patterns. We find that a firm with a larger number of products in its portfolio and a higher degree of substitutability among these products adopts a lower pass-through of costs. While the direction of results is robust, our simulations show that the muting effect on pass-through is limited when comparing pass-through by stand-alone firms to pass-through under the actual, moderately concentrated market structure.

Date: 2018
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DOI: 10.1080/13571516.2018.1426411

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