Pass-Through as an Economic Tool -- On Second Derivatives, Social Incidence, and Price Discrimination

15 Pages Posted: 4 Jul 2019

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: July 2, 2019

Abstract

Weyl and Fabinger (2013) show that the social incidence of competition, and the output and welfare effects of third-degree price discrimination, can be analyzed 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 affects the social incidence of competition calculations and sheds new light on the output and welfare effects of third-degree price discrimination in 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 Second Derivatives, Social Incidence, and Price Discrimination (July 2, 2019). 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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