Advanced Search
MyIDEAS: Login to save this article or follow this journal

Strategic Pricing Behavior under Asset Value Maximization

Contents:

Author Info

  • Shinn-Shyr Wang
  • Kyle W. Stiegert
  • Tirtha P. Dhar

Abstract

"In this paper, we empirically evaluate strategic pricing behavior and shareholder delegation of financial market objectives in the U.S. butter and margarine market. Shareholders are assumed to maximize the value of firm assets according to a certainty equivalent capital asset pricing model (CAPM). The delegation setup instructs managers to maximize a linear combination of firm profits and shareholder equity values. A key result from the analysis is that a test of financial market influences cannot be rejected in the product market for butter and margarine. Product market competition is best described using a conjectural variation model of industrial organization. Estimates of Lerner Indexes suggest significant market power and counterfactual simulations point toward significant biases in estimated Lerner Indexes when capital market dimensions are ignored or if the wrong market structure is assumed." Copyright (c) 2009 Canadian Agricultural Economics Society.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1744-7976.2009.01174.x
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie in its journal Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie.

Volume (Year): 58 (2010)
Issue (Month): 2 (06)
Pages: 151-170

as in new window
Handle: RePEc:bla:canjag:v:58:y:2010:i:2:p:151-170

Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0008-3976
More information through EDIRC

Order Information:
Web: http://www.blackwellpublishing.com/subs.asp?ref=0008-3976

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Nevo, Aviv, 1999. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Competition Policy Center, Working Paper Series, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley qt7cm5p858, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  2. Kovenock, Dan & Phillips, Gordon, 1995. "Capital Structure and Product-Market Rivalry: How Do We Reconcile Theory and Evidence?," American Economic Review, American Economic Association, American Economic Association, vol. 85(2), pages 403-08, May.
  3. Mark J. Roberts & Larry Samuelson, 1988. "An Empirical Analysis of Dynamic, Nonprice Competition in an Oligopolistic Industry," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 200-220, Summer.
  4. Blundell & Robin, 2000. "Latent separability : grouping goods without weak separability," Working Papers 156158, Institut National de la Recherche Agronomique, France.
  5. Chaim Fershtman & Kenneth L Judd, 1984. "Equilibrium Incentives in Oligopoly," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Brian W. Gould, 2003. "An Empirical Assessment of Endogeneity Issues in Demand Analysis for Differentiated Products," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 85(3), pages 605-617.
  7. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, American Economic Association, vol. 70(3), pages 312-26, June.
  8. Dhar, Tirtha Pratim & Chavas, Jean-Paul & Gould, Brian W., 2002. "An Empirical Assessment of Endogeneity Issues In Demand Analysis for Differentiated Products," Research Reports, University of Connecticut, Food Marketing Policy Center 25227, University of Connecticut, Food Marketing Policy Center.
  9. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 104(4), pages 724-46, August.
  10. Browning, Martin, 1991. "A Simple Nonadditive Preference Structure for Models of Household Behavior over Time," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(3), pages 607-37, June.
  11. Naufel J. Vilcassim & Vrinda Kadiyali & Pradeep K. Chintagunta, 1999. "Investigating Dynamic Multifirm Market Interactions in Price and Advertising," Management Science, INFORMS, INFORMS, vol. 45(4), pages 499-518, April.
  12. Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, Econometric Society, vol. 41(5), pages 867-87, September.
  13. Duffy, Martyn, 1995. "Advertising in demand systems for alcoholic drinks and tobacco: A comparative study," Journal of Policy Modeling, Elsevier, Elsevier, vol. 17(6), pages 557-577, December.
  14. Kovenock, Dan & Phillips, Gordon M, 1997. "Capital Structure and Product Market Behavior: An Examination of Plant Exit and Investment Decisions," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 10(3), pages 767-803.
  15. Mittelhammer, Ronald C. & Shi, Hongqi & Wahl, Thomas I., 1996. "Accounting For Aggregation Bias In Almost Ideal Demand Systems," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, Western Agricultural Economics Association, vol. 21(02), December.
  16. Golan, Amos & Karp, Larry & Perloff, Jeffrey M., 1999. "Estimating Coke and Pepsi's price and advertising strategies," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series, Department of Agricultural & Resource Economics, UC Berkeley qt6rf8j6m4, Department of Agricultural & Resource Economics, UC Berkeley.
  17. Chevalier, Judith A, 1995. "Capital Structure and Product-Market Competition: Empirical Evidence from the Supermarket Industry," American Economic Review, American Economic Association, American Economic Association, vol. 85(3), pages 415-35, June.
  18. Jean-Pierre Dubé, 2004. "Multiple Discreteness and Product Differentiation: Demand for Carbonated Soft Drinks," Marketing Science, INFORMS, INFORMS, vol. 23(1), pages 66-81, September.
  19. Wang, Shinn-Shyr & Stiegert, Kyle W., 2006. "The Duopolistic Firm with Endogenous Risk Control: Case of Persuasive Advertising and Product Differentiation," Staff Paper Series, University of Wisconsin, Agricultural and Applied Economics 496, University of Wisconsin, Agricultural and Applied Economics.
  20. Moschini, GianCarlo & Moro, D. & Green, Richard D., 1994. "Maintaining and Testing Separability in Demand Systems," Staff General Research Papers, Iowa State University, Department of Economics 11247, Iowa State University, Department of Economics.
  21. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, American Finance Association, vol. 47(2), pages 427-65, June.
  22. Harris, Frederick H deB, 1986. "Market Structure and Price-Cost Performance under Endogenous Profit Risk," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 35(1), pages 35-59, September.
  23. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, Econometric Society, vol. 57(2), pages 307-33, March.
  24. Ross, Stephen A., 1976. "The arbitrage theory of capital asset pricing," Journal of Economic Theory, Elsevier, Elsevier, vol. 13(3), pages 341-360, December.
  25. Reitman, David, 1993. "Stock Options and the Strategic Use of Managerial Incentives," American Economic Review, American Economic Association, American Economic Association, vol. 83(3), pages 513-24, June.
  26. repec:inr:wpaper:249984 is not listed on IDEAS
  27. Gasmi, Farid & Laffont, Jean-Jacques & Vuong, Quang, 1992. "Econometric Analysis of Collusive Behavior in a Soft Drink Market," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 16, Institut d'Économie Industrielle (IDEI), Toulouse.
  28. Muellbauer, John, 1975. "Aggregation, Income Distribution and Consumer Demand," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 42(4), pages 525-43, October.
  29. Subrahmanyam, Marti G & Thomadakis, Stavros B, 1980. "Systematic Risk and the Theory of the Firm," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 94(3), pages 437-51, May.
  30. Blundell, Richard & Pashardes, Panos & Weber, Guglielmo, 1993. "What Do We Learn About Consumer Demand Patterns from Micro Data?," American Economic Review, American Economic Association, American Economic Association, vol. 83(3), pages 570-97, June.
  31. Conlin, Michael & Furusawa, Taiji, 2000. "Strategic Delegation and Delay in Negotiations over the Bargaining Agenda," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 18(1), pages 55-73, January.
  32. Albert Banal-Estañol & Marco Ottaviani, 2006. "Mergers with Product Market Risk," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 15(3), pages 577-608, 09.
  33. Murphy, Kevin J., 1999. "Executive compensation," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 38, pages 2485-2563 Elsevier.
  34. Rafael Moner-Colonques & José J. Sempere-Monerris & Amparo Urbano, 2004. "Strategic Delegation with Multiproduct Firms," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 13(3), pages 405-427, 09.
  35. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 37(1), pages 7-63, March.
  36. Cotterill, Ronald W & Putsis, William P, Jr & Dhar, Ravi, 2000. "Assessing the Competitive Interaction between Private Labels and National Brands," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 73(1), pages 109-37, January.
  37. Eugene F. Fama & Kenneth R. French, 2004. "The Capital Asset Pricing Model: Theory and Evidence," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 18(3), pages 25-46, Summer.
  38. Verbeke, Wim & Ward, Ronald W., 2001. "A fresh meat almost ideal demand system incorporating negative TV press and advertising impact," Agricultural Economics, Blackwell, Blackwell, vol. 25(2-3), pages 359-374, September.
  39. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 95(380a), pages 138-47, Supplemen.
  40. Sundaram, Anant K. & John, Teresa A. & John, Kose, 1996. "An empirical analysis of strategic competition and firm values The case of R&D competition," Journal of Financial Economics, Elsevier, Elsevier, vol. 40(3), pages 459-486, March.
  41. Timothy J. Richards & Pieter. Van Ispelen & Albert Kagan, 1997. "A Two-Stage Analysis of the Effectiveness of Promotion Programs for U.S. Apples," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 79(3), pages 825-837.
  42. Alessie, Rob & Kapteyn, Arie, 1991. "Habit Formation, Interdependent References and Demographic Effects in the Almost Ideal Demand System," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 101(406), pages 404-19, May.
  43. Kedia, Simi, 2006. "Estimating product market competition: Methodology and application," Journal of Banking & Finance, Elsevier, Elsevier, vol. 30(3), pages 875-894, March.
  44. Miller, Nolan H. & Pazgal, Amit, 2005. "Strategic trade and delegated competition," Journal of International Economics, Elsevier, Elsevier, vol. 66(1), pages 215-231, May.
  45. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-22, February.
  46. Bronnenberg, B.J.J.A.M. & Rossi, P.E. & Vilcassim, N.J., 2005. "Structural modeling and policy simulation," Open Access publications from Tilburg University urn:nbn:nl:ui:12-332471, Tilburg University.
  47. Iwata, Gyoichi, 1974. "Measurement of Conjectural Variations in Oligopoly," Econometrica, Econometric Society, Econometric Society, vol. 42(5), pages 947-66, September.
  48. Hunt-McCool, Janet & Kiker, B F & Ng, Ying Chu, 1994. "Estimates of the Demand for Medical Care under Different Functional Forms," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 9(2), pages 201-18, April-Jun.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Du, Ying & Stiegert, Kyle W., 2009. "Strategic Vertical Pricing in the U.S. Butter Market," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin, Agricultural and Applied Economics Association 51712, Agricultural and Applied Economics Association.
  2. Wang, Shinn-Shyr & Stiegert, Kyle W., 2006. "The Duopolistic Firm with Endogenous Risk Control: Case of Persuasive Advertising and Product Differentiation," Staff Paper Series, University of Wisconsin, Agricultural and Applied Economics 496, University of Wisconsin, Agricultural and Applied Economics.
  3. Hovhannisyan, Vardges & Stiegert, Kyle W. & Bozic, Marin, 2013. "On Endogeneity Of Retail Market Power In An Equilibrium Analysis: A Control Function Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C., Agricultural and Applied Economics Association 149830, Agricultural and Applied Economics Association.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bla:canjag:v:58:y:2010:i:2:p:151-170. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.