When cost improvements harm consumers |
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Authors: | Philippe Bontems Nicolas Gruyer |
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Institution: | (1) Université de Toulouse (GREMAQ, INRA, IDEI), Manufacture des Tabacs, Allées de Brienne, 31000 Toulouse, France;(2) LEEA-Enac, 7 avenue Edouard Belin, BP4005, 31055 Toulouse Cedex 4, France |
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Abstract: | This paper demonstrates that improving cost efficiency in a vertical structure might sometimes be detrimental to consumers.
This is in stark contrast with the standard microeconomics result which suggests that the surplus generated by any efficiency
gain in production is shared between firms and final consumers, depending on the degree of market power. These new results
may apply in contexts such as the diffusion of knowledge and techniques and governmental intervention through income support
programs.
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Keywords: | Oligopsonists Retail Vertical structure Cost pass-through |
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