Retail Prices for Milk by Fat Content: A New Theory and Empirical Test of Retailer Pricing Behavior
AbstractWe study a heretofore unexamined type of product differentiation, horizontally differentiated products with differential costs, and apply the analysis to retail pricing of fluid milk products. The theoretical models yield unique predictions for the relationship among prices of the four horizontally differentiated fluid milk products (skim, 1%, 2%, and whole milk) and the impacts of butterfat and nonfat milk costs on prices, depending upon the form of retail competition. An empirical analysis of retail milk pricing for four major cities in California enables tests to be conducted of which form of behavior best characterizes grocery retailing in these cities.
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Bibliographic InfoArticle provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.
Volume (Year): 34 (2009)
Issue (Month): 2 (August)
differential costs; horizontal differentiation; milk; oligopoly; retail pricing; Demand and Price Analysis; Livestock Production/Industries;
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