Market Power in Distribution and Pass‐Through for Consumers and Producers

23 Pages Posted: 24 Jan 2019

See all articles by Joseph Francois

Joseph Francois

University of Bern

Miriam Manchin

University College London; Centro Studi Luca d'Agliano

Date Written: February 2019

Abstract

We examine the differential pass‐through of import prices into consumer and producer prices. We develop a framework with distribution costs and distribution market power. We then examine pass‐through from import prices to consumer and producer prices in the euro area using the U.S. import price as instrument. We find that pass‐through rates to producer prices are more sensitive to changes in distribution margins than pass‐through to consumer prices. Furthermore, only a portion of import price changes translate into domestic price changes limiting potential consumer benefits from tariff liberalization, with market power in distribution services being one important factor reducing pass‐through.

Suggested Citation

Francois, Joseph and Manchin, Miriam, Market Power in Distribution and Pass‐Through for Consumers and Producers (February 2019). Review of International Economics, Vol. 27, Issue 1, pp. 290-312, 2019. Available at SSRN: https://ssrn.com/abstract=3320783 or http://dx.doi.org/10.1111/roie.12376

Joseph Francois (Contact Author)

University of Bern

Gesellschaftsstrasse 49
Bern, BERN 3001
Switzerland

Miriam Manchin

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

Centro Studi Luca d'Agliano ( email )

Via Conservatorio 7
Milan, 20122
Italy

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