Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/339492 
Year of Publication: 
2025
Series/Report no.: 
IFS Working Papers No. 25/18
Publisher: 
The Institute for Fiscal Studies (IFS), London
Abstract: 
Pass-through rates are relevant in a variety of contexts, such as estimating antitrust damages. It is often alleged that focal pricing, the practice of charging only special prices, e.g. ending in 9s, reduces the degree of pass-through in an industry. This claim has serious consequences, including the dismissal of court cases, but it is not grounded in economic theory or evidence. I prove that, in a simple but general framework, expected pass-through is unchanged by the presence of focal pricing constraints. It is therefore not safe to assume that pass-through will be low in industries characterised by focal pricing constraints.
Subjects: 
Price management
Intermediate inputs
Cost pass-through
Price competition
Price theory
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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