Patterns of Pass-through of Commodity Price Shocks to Retail Prices

The pass-through of corn, wheat, and gasoline prices can be re-estimated and compared with rough estimate of the level of pass-through that can be derived from the cost share of the commodity in the final product. Farm to shelf markups have always concerned farmers, who typically receive a very small share of the shelf price. The retail price data set comes from scanner data on two product categories from 184 retail grocery stores in California. There is considerable variation in price from store to store, despite the fact that all these stores belong to the same chain. Chain management has stated that the stores take independent price decisions. The fixed effects consider all the variation in the store and store customers that are invariant in time like location and number of employees. There are fewer sales when commodity prices go up, indicating that that net prices should be used for pass-through analysis.