Bias in Reduced-Form Estimates of Pass-through

We show that, in general, consistent estimates of cost pass-through are not obtained from reduced-form regressions of price on cost. We derive a formal approximation for the bias that arises even under standard orthogonality conditions. We provide guidance on the conditions under which bias may frustrate inference.

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Year of publication:	2014
Authors:	MacKay, Alexander ; Miller, Nathan H. ; Remer, Marc ; Sheu, Gloria
Publisher:	Washington, DC : U.S. Department of Justice, Antitrust Division, Economic Analysis Group (EAG)

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Series:	Economic Analysis Group Discussion Paper ; EAG 14-1
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	788912135 [GVK] hdl:10419/202406 [Handle] RePEc:doj:eagpap:201401 [RePEc]
Source:	EconStor

Persistent link: https://www.econbiz.de/10012056340