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Estimation of the Effects of New Brands on Incumbents’ Profits and Consumer Welfare: The U.S. Processed Cheese Market Case

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  • Donghun Kim

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    Abstract

    I estimate the effects of new brands on market competition and consumer welfare in the U.S. processed cheese market. I find that an observed increase in consumer welfare was attributable mainly to an increase in the number of brands in the sample market, while the price effect, which measures welfare change caused by adding new brands to existing brands, decreased welfare as the prices of the existing brands increased in a large portion of sample markets. The price increase was most pronounced among the introducer’s existing brands. I also find that the data used in the paper identify a significant enhancement of consumer welfare as a result of the change in product characteristics provided by new brands even if a large portion of welfare gain is explained by the assumption on the error term in the utility function. Copyright Kluwer Academic Publishers 2004

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    File URL: http://hdl.handle.net/10.1007/s11151-004-3172-6
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    Bibliographic Info

    Article provided by Springer in its journal Review of Industrial Organization.

    Volume (Year): 25 (2004)
    Issue (Month): 3 (09)
    Pages: 275-293

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    Handle: RePEc:kap:revind:v:25:y:2004:i:3:p:275-293

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    Web page: http://www.springerlink.com/link.asp?id=100336

    Related research

    Keywords: Consumer welfare; incumbent’s profits; new brands; random coefficient model;

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    1. Patrick Bajari & Lanier Benkard, 2001. "Discrete Choice Models as Structural Models of Demand: Some Economic Implications of Common Approaches," Working Papers 01016, Stanford University, Department of Economics.
    2. Benkard, C. Lanier & Bajari, Patrick, 2001. "Discrete Choice Models as Structural Models of Demand: Some Economic Implications of Common Approaches," Research Papers 1710, Stanford University, Graduate School of Business.
    3. Shane Greenstein, 1994. "From Superminis to Supercomputers: Estimating Surplus in the Computing Market," NBER Working Papers 4899, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Anonymous, 2005. "Antitrust Analysis of Supermarket Retailing: Common Global Concerns that Play Out in Local Markets," 2005 Conference (49th), February 9-11, 2005, Coff's Harbour, Australia 137831, Australian Agricultural and Resource Economics Society.

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