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That doesn’t change anything. It’s not a competitive industry so the price does not reflect the cost. Think of it this way. Suppose you had a business and because you were a monopoly you could charge a very high price. Your brother in law needed a job so you hired him and pay him more than he’s worth. That doesn’t increase the price you charge. It just reduces your take home. If you fired him then you could save that money but the price you charge would not change. Why should it? Supply and demand have not changed.

Except supply and demand aren't your only economic factors. They're not direct price setters, they're relative. Cost of production/to market is what sets the base price, then supply/demand simply move that number up or down.

But your analogy is slightly off, your take home wouldn't be affected by him hired or not, since you're setting the price (offering rebate). So getting rid of your brother doesn't help you, it helps the end customer. There's artificial price inflation that has nothing to do with supply and demand, so yes, you're right, SnD won't change. But it's not the variable affecting price changes in this scenario, so SnD doesn't matter.

Let's say you make windows, and you discover a plastic that's just as strong/clear as glass, but half the cost. So you can cut your price by 25%, and thereby take market share from the other guy. But if your installer doesn't pass some of the price cut to the consumer, why would consumers pick your windows instead? Nothing changed for them. But, if you sell your windows direct to consumers and let them hire their own installers, of course they'll pick your windows since they're 25% cheaper!