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Market-Structure Determinants of National Brand-Private Label Price Differences of Manufactured Food Products

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  • Connor, John M
  • Peterson, Everett B

Abstract

This paper estimates the relationships between market structure and the Lerner index of monopoly constructed from price data on processed food products sold through grocery stores. A theoretical model of a differentiated oligopoly specifies two determinants of price-cost margins: the Herfindahl-Hirschman index of seller concentration adjusted for the elasticity of demand and the industry advertising-to-sales ratio. The results indicate that the three principal determinants of price-cost margin variation, in order of their impacts, are: advertising intensity, elasticity of demand, and concentration. Previous structure-performance studies that did not incorporate the elasticity of demand, and concentration. Previous structure-performance studies that did not incorporate the elasticity of demand were probably misspecified. Copyright 1992 by Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

Volume (Year): 40 (1992)
Issue (Month): 2 (June)
Pages: 157-71

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Handle: RePEc:bla:jindec:v:40:y:1992:i:2:p:157-71

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821

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  1. Pagoulatos, Emilio & Sorensen, Robert, 1986. "What determines the elasticity of industry demand?," International Journal of Industrial Organization, Elsevier, vol. 4(3), pages 237-250, September.
  2. Connor, John M & Peterson, Everett B, 1992. "Market-Structure Determinants of National Brand-Private Label Price Differences of Manufactured Food Products," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 157-71, June.
  3. Cowling, Keith & Waterson, Michael, 1976. "Price-Cost Margins and Market Structure," Economica, London School of Economics and Political Science, vol. 43(171), pages 267-74, August.
  4. Porter, Michael E, 1976. "Interbrand Choice, Media Mix and Market Performance," American Economic Review, American Economic Association, vol. 66(2), pages 398-406, May.
  5. Joseph E. Stiglitz & G. Frank Mathewson (ed.), 1986. "New Developments in the Analysis of Market Structure," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262690934, December.
  6. Nickell, Stephen J & Metcalf, David, 1978. "Monopolistic Industries and Monopoly Profits or, Are Kellogg's Cornflakes Overpriced?," Economic Journal, Royal Economic Society, vol. 88(350), pages 254-68, June.
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