doc__table__117

| (53) | Secondly, the product demand that the direct customer faces affects the level of passing-on. A standard price formation mechanism builds on the fact that the demand a firm faces (i.e. the quantity it sells) decreases when it raises its price. The extent to which a direct purchaser raises its own price when facing an overcharge depends on whether the demand reacts strongly to such a price change or not. For instance, if the direct purchaser is a monopolist and the demand that it faces is equally sensitive to a change in prices for all price levels and the direct purchaser is facing constant marginal costs, economic theory suggests that half of the overcharge will be passed on. If the demand the monopolist faces drops ‘more and more’ (i.e. at an increasing rate) when price increases, it is less likely that the overcharge will be passed on as compared to a situation in which the demand that such a monopolist faces drops ‘less and less’ (i.e. at a decreasing rate) as the price increases, all else being equal (58).

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Source: EUR-Lex (Cellar) · retrieved 2026-09-25 · Text as adopted (Official Journal); later amendments are not incorporated in this text.