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A Structural Model of the Analysis of Retail Market Power: The Case of Fluid Milk

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  • Vardges Hovhannisyan
  • Brian W. Gould
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    Abstract

    We derive a structural model of firm behavior that is composed of the Generalized Quadratic Almost Ideal Demand System to represent both consumers' milk preferences and firm profit maximization conditions that allow for a range of competitive scenarios. The importance of this specification is found in its fuller representation of consumer preferences, as opposed to the Linear Approximate Almost Ideal Demand System used in previous analyses. We apply this structural framework to investigate retailer conduct in the sale of beverage milk in a U.S. market using product-level data. Our Lerner Index estimates show that retailers are not perfectly competitive. However, this deviation is small. Copyright 2012, Oxford University Press.

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    File URL: http://hdl.handle.net/10.1093/ajae/aar124
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    Bibliographic Info

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

    Volume (Year): 94 (2012)
    Issue (Month): 1 ()
    Pages: 67-79

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    Handle: RePEc:oup:ajagec:v:94:y:2012:i:1:p:67-79

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    Cited by:
    1. Anonymous & Bosch, Darrell J., 2013. "Table of contents," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 45(02), May.
    2. Hovhannisyan, Vardges & Bozic, Marin, 2013. "A Benefit-Function Approach to Studying Market Power: An Application to the U.S. Yogurt Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 38(2), August.
    3. Cai, Xiaowei & Stiegert, Kyle W., 2012. "Economic Analysis of the U.S. Fluid Milk Industry," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124939, Agricultural and Applied Economics Association.
    4. 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. 149830, Agricultural and Applied Economics Association.

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