Pass-Through of Own and Rival Cost Shocks: Evidence from the U.S. Fracking Boom / Erich Muehlegger, Richard L. Sweeney.

Format:

Book

Author/Creator:

Muehlegger, Erich.

Contributor:

National Bureau of Economic Research.

Sweeney, Richard L.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24025.

NBER working paper series no. w24025

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Pass-Through of Own and Rival Cost Shocks

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

In imperfectly competitive settings, a firm's price depends on its own costs as well as those of its competitors. We demonstrate that this has important implications for the estimation and interpretation of pass-through. Leveraging a large input cost shock resulting from the fracking boom, we isolate price responses to firm-specific, regional and industry-wide input cost shocks in the US oil refining industry. The pass-through of these components vary from near zero to full pass-through, reconciling seemingly disparate results from the literature. We illustrate the policy implications of rival cost pass-through in the context of a tax on refinery carbon emissions.

Notes:

Print version record

November 2017.