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Brand-Supermarket Demand for Breakfast Cereals and Retail Competition

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  • Benaissa Chidmi
  • Rigoberto A. Lopez

Abstract

The Berry, Levinsohn, and Pakes (1995) market equilibrium model is extended to the supermarket chain level to examine consumer choices and retail competition for thirty-seven brands of breakfast cereals in Boston. Estimated taste parameters for product characteristics vary significantly across consumers. Although consumers are price-sensitive with respect to their chosen cereals, they exhibit strong brand and supermarket loyalty. Retail markups increase and marginal costs decrease with grocery market shares, attesting to oligopoly power with efficiencies. Markups decrease with the own-price elasticity of demand, with Corn Flakes having the highest markups. A detailed picture of consumer response and supermarket competition is provided. Copyright 2007, Oxford University Press.

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File URL: http://hdl.handle.net/10.1111/j.1467-8276.2007.00994.x
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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 89 (2007)
Issue (Month): 2 ()
Pages: 324-337

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Handle: RePEc:oup:ajagec:v:89:y:2007:i:2:p:324-337

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Cited by:
  1. Thunström, Linda, 2008. "Preference Heterogeneity and Habit Persistence: The Case of Breakfast Cereal Consumption," UmeÃ¥ Economic Studies 738, Umeå University, Department of Economics.
  2. Thunström, Linda, 2008. "Food Consumption, Paternalism and Economic Policy," UmeÃ¥ Economic Studies 739, Umeå University, Department of Economics.
  3. Elena Lopez & Rigoberto A. Lopez, 2008. "Demand for Differentiated Milk Products: Implications for Price Competition," Food Marketing Policy Center Research Reports 104, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  4. Cotterill, Ronald, 2007. "Market Definition and Market Power in the British Supermarket Industry," Research Reports 149201, University of Connecticut, Food Marketing Policy Center.
  5. Tchumtchoua, Sylvie & Dey, Dipak, 2007. "Semiparametric Bayesian Estimation of Random Coefficients Discrete Choice Models," Research Reports 149208, University of Connecticut, Food Marketing Policy Center.
  6. Michael Cohen & Rui Huang & Chen Zhu, 2012. "The Use of Voluntary Marketing Initiatives to Improve the Nutritional Profile of Kids Cereals," Working Papers 11, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  7. Lopez, Jose Antonio & Malaga, Jaime E. & Chidmi, Benaissa & Belasco, Eric J. & Surles, James, 2012. "Mexican Meat Demand at the Table Cut Level: Estimating a Censored Demand System in a Complex Survey," Journal of Food Distribution Research, Food Distribution Research Society, vol. 43(2), July.

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