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- Title
PASS-THROUGH RATES WHEN FIRMS CAN VARY PACKAGE SIZES.
- Authors
Alexandrov, Alexei
- Abstract
I show that when firms can change the quantity of product offered in each package, the standard pass-through rate calculations need to be adjusted. In particular, if a firm's cost increases, the firm decreases the quantity of the product offered and the price of the package, resulting in a negative pass-through rate. Calculating the pass-through rate using the per-unit quantity price restores the expected positive pass-through rate. The results are confirmed by many observations from the industry and continue to hold when firms offer a product line and engage in second-degree price discrimination.
- Subjects
PASS through entities; QUANTITY of products; BUSINESS finance; PACKAGING costs; PRICE discrimination; TIME-based pricing
- Publication
Journal of Competition Law & Economics, 2014, Vol 10, Issue 3, p611
- ISSN
1744-6414
- Publication type
Article
- DOI
10.1093/joclec/nhu014