Demand Curvature and Pass-Through in Differentiated Oligopoly

Paul S. Koh

Papers from arXiv.org

Abstract: This paper studies cost pass-through in differentiated-product oligopoly. I derive a general representation of the pass-through matrix that decomposes equilibrium price responses into the roles of demand curvature, substitution, and multiproduct ownership. This extends the classic insight in single-product monopoly to multiproduct settings in which diversion and ownership also matter. I then develop a tractable first-order approximation that yields a sufficient-statistics characterization for empirically relevant demand systems. Finally, I characterize the small-share limit and show how common demand specifications impose tail restrictions that shape pass-through. The results provide a practical framework for applied work on tax incidence, merger analysis, and related questions in imperfect competition.

Date: 2026-04
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