Robust Welfare under Imperfect Competition

TL;DR

This paper develops a robust welfare analysis framework under partial knowledge of supply and demand, incorporating supply-side parameters to derive bounds on economic welfare measures.

Contribution

It extends existing robust approaches by including supply-side considerations and characterizes extremal supply terms using simple inverse pass-through functions.

Findings

Supply-side bounds are attained by inverse pass-through functions with two endpoint values.

The method produces simple bounds for various welfare measures.

Incorporating supply-side parameters refines welfare analysis under uncertainty.

Abstract

We study welfare analysis for policy changes when supply and demand behavior are only partially known. We augment the robust approach pioneered by Kang and Vasserman (2025) by incorporating the supply side. We posit intervals of feasible pass-through and conduct (market-power) parameters, then apply them to two equilibrium snapshots to characterize the extremal supply-side terms entering welfare. We show that the supply-side bounds are attained by inverse pass-through functions that take only the two endpoint values of the specified interval, separated by a single price cutoff. Combining these supply-side extrema with demand-side shape restrictions, we produce simple bounds for consumer surplus, producer surplus, total surplus, and deadweight loss.