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COST PASS-THROUGH IN DIFFERENTIATED PRODUCT MARKETS: THE CASE OF U.S. PROCESSED CHEESE -super-*

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  • DONGHUN KIM
  • RONALD W. COTTERILL
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    Abstract

    In this paper, we estimate a mixed logit model for demand in the U.S. processed cheese market. The estimates are used to determine pass-through rates of cost changes under different behavioral regimes. We find that, under collusion, the pass-through rates for all brands fall between 21% and 31% while, under Nash-Bertrand price competition, the range of pass-through rates is between 73% and 103%. The mixed logit model provides a more flexible framework for studying pass-through rates than the logit model since the curvature of the demand functions depends upon the empirical distribution of consumer types. Copyright 2008 The Authors.

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    Bibliographic Info

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

    Volume (Year): 56 (2008)
    Issue (Month): 1 (03)
    Pages: 32-48

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    Handle: RePEc:bla:jindec:v:56:y:2008:i:1:p:32-48

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    Cited by:
    1. Zimmerman, Paul R. & Carlson, Julie A., 2010. "Competition and cost pass-through in differentiated oligopolies," MPRA Paper 25931, University Library of Munich, Germany.
    2. Bouhlal, Yasser & Capps, Oral Jr. & Ishdorj, Ariun, 2013. "Estimating the Censored Demand for U.S. Cheese Varieties Using Panel Data: Impact of Economic and Demographic Factors," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151298, Agricultural and Applied Economics Association.

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