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Multiproduct cost passthrough: Edgeworth's paradox revisited

Abstract:

Edgeworth's paradox of taxation occurs when an increase in the unit cost of a product causes a multiproduct monopolist to reduce prices. We give simple illustrations of the paradox, we show how it can arise with uniform pricing, and we give an analysis of the case of linear marginal cost and demand conditions. We show how the matrix of cost-passthrough terms must be similar to a positive definite matrix. When the firm supplies two substitute products we show how the paradox always occurs with...

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Institution:
University of Oxford
Division:
SSD
Department:
Economics
Oxford college:
All Souls College
Role:
Author
More by this author
Institution:
University of Oxford
Division:
SSD
Department:
Economics
Role:
Author
Publisher:
University of Oxford Publisher's website
Article number:
967
Series:
Department of Economics Discussion Paper Series
Publication date:
2022-03-25
Paper number:
967
Language:
English
Keywords:
Pubs id:
1248622
Local pid:
pubs:1248622
Deposit date:
2022-03-28

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