Pass-Through as an Economic Tool -- On Exogenous Competition, Social Incidence, and Price Discrimination

17 Pages Posted: 4 Jul 2019 Last revised: 24 Apr 2020

See all articles by Jeanine Miklós-Thal

Jeanine Miklós-Thal

University of Rochester - Simon Business School

Greg Shaffer

University of Rochester - Simon Business School

Date Written: April 24, 2020

Abstract

Weyl and Fabinger (2013) analyze the social incidence of competition and the
output and welfare effects of third-degree price discrimination by considering the
hypothetical entrance of exogenous quantity into a market. The formulas they use for
this purpose, however, are correct only for marginal changes in exogenous quantity
starting at zero or if demand functions are linear. We show how using the correct
formulas changes Weyl and Fabinger's analyses and leads to new results on the social
incidence of competition and on the output and welfare effects of third-degree price
discrimination in monopoly and oligopoly markets.

Keywords: pass-through, third-degree price discrimination, social incidence of competition

JEL Classification: D00, D42, D43, L00, L13

Suggested Citation

Miklós-Thal, Jeanine and Shaffer, Greg, Pass-Through as an Economic Tool -- On Exogenous Competition, Social Incidence, and Price Discrimination (April 24, 2020). Available at SSRN: https://ssrn.com/abstract=3413943 or http://dx.doi.org/10.2139/ssrn.3413943

Jeanine Miklós-Thal (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Greg Shaffer

University of Rochester - Simon Business School ( email )

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