The Pass-Through of Cost Changes to Prices in the Restaurant Industry Before and After COVID-19

Abstract

In this article, I examine the pass-through of cost changes to price changes in the restaurant industry, both before and after the COVID-19 pandemic. The analysis reveals that prior to the pandemic, the relationship between combined costs and the food away from home price—used as a proxy for restaurant prices—was relatively stable, indicating a rapid pass-through of costs to prices. However, during the pandemic, frequent and significant fluctuations in overall costs led to increased hesitation in pricing decisions by restaurant owners, suggesting a slower pass-through during this period.