Double marginalization and cost pass-through: Weyl-Fabinger and Cowan meet Spengler and Bresnahan-Reiss

Takanori Adachi, Takeshi Ebina

Research output: Contribution to journalArticle

12 Citations (Scopus)

Abstract

Consider the classical double marginalization problem of single-product successive monopolies. We show that the ratio of the cost pass-through at the final sale relative to that at the wholesale level is characterized by the curvature of inverse demand in the final market. We also apply Cowan's (2012) method, which utilizes the idea of pass-through in an analysis of third-degree price discrimination, to compare consumer surplus under vertical integration and separation.

Original languageEnglish
Pages (from-to)170-175
Number of pages6
JournalEconomics Letters
Volume122
Issue number2
DOIs
Publication statusPublished - 1 Feb 2014

Keywords

  • Consumer surplus
  • Cost pass-through
  • Double marginalization
  • Inverse demand curvature

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