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. Author manuscript; available in PMC: 2024 Jan 11.
Published in final edited form as: Am Econ Rev. 2018 Aug;108(8):2048–2087.

Figure 8. Determinants of Incomplete Pass-Through.

Figure 8.

Notes: Figure shows the pass-though of an increase in monthly payments depicted by a decrease in (net) marginal costs. Panel A examines pass-through when there are perfectly competitive markets and either no selection or advantageous selection. With no selection (horizontal AC curve), a downward shift in costs translates one-for-one into a reduction in premiums, from point A to point B. With advantageous selection (upward-sloping AC curve), a downward shift in costs translates less than one-for-one into a reduction in premiums, from point A to point C. Panel B examines pass-through where there is no selection and either perfectly competitive markets or a monopolist. Points A and B are repeated from panel A. With monopolist pricing, a downward shift in costs translates less than one-for-one into a reduction in premiums, from point C to point D.