Demand Curvature and Pass-Through in Multiproduct Oligopoly

Abstract

Economic interventions change firms' pricing incentives, but their effects depend on how those incentives propagate across products and firms. This paper develops tractable characterizations of that propagation under multiproduct Bertrand competition. A decomposition of the pricing system isolates demand curvature, substitution, and ownership, linking the equilibrium response matrix to commonly used empirical demand models. It yields approximations with explicit error bounds and separates individual adjustment from equilibrium feedback. Small-share limits reveal when interactions disappear and when substitution within nests or selection among heterogeneous consumers preserves them. For nested logit, a closed-form response reduces the limiting product-level system to averages within firm--nest groups, exposing the direction of price spillovers. The same framework organizes local responses to changes in costs, demand, and ownership. The results clarify which features of demand support simple incidence predictions and which interactions those predictions must retain.