COST PASS-THROUGH AND PRODUCT DIFFERENTIATION

The objective of this paper is to model and estimate the effect of product differentiation on retail pass-through of cost shocks. We use a model with common and idiosyncratic costs and apply it to Canadian market prices for ready to eat soups. We measure product differentiation with a distance vector adding a spatial dimension to the approach. We find that more differentiated products show higher prices, lower cost pass-through of common price shocks, higher cost pass-through of idiosyncratic cost shocks, and a more sluggish price adjustment.


Issue Date:
Aug 28 2017
Publication Type:
Conference Paper/ Presentation
Language:
English
Total Pages:
30




 Record created 2017-08-02, last modified 2017-08-29

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