OWN AND CROSS PASS-THROUGH IN A STRUCTURAL FRAMEWORK
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The article offers measures of own and cross cost pass-through in a structural framework. Unlike the traditional reduced-form analysis used in the previous literature, our approach is applicable in situations where firm marginal cost data are unobserved.
The empirical value of the model is illustrated in an application to retail pass-through for national and store brand yogurt using an inverse demand derived from the economic theory. We find that ignoring cross pass-through between the brands biases own pass-through estimates.