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Strategic Implications of Retail Pricing in the U.S. Fluid Milk Market

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  • Dhar, Tirtha Pratim
  • Cox, Thomas L.

Abstract

We explore brand level strategic interactions between skim/low fat and whole milk brands by estimating detailed price elasticity matrix using quadratic almost ideal demand system for eight major U.S. cities. Results of our analysis suggest that the market and demand behavior of skim/low fat and whole milk brands are different. Demand for skim/low fat milk is more elastic than in the case of whole milk. Highly inelastic demand for large number of Private label whole milk brands suggests 'loss leader' pricing strategy by the retailers. Such pricing strategy does not seem to be the norm in skim/low fat milk market.

Suggested Citation

  • Dhar, Tirtha Pratim & Cox, Thomas L., 2003. "Strategic Implications of Retail Pricing in the U.S. Fluid Milk Market," 2003 Annual meeting, July 27-30, Montreal, Canada 22184, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea03:22184
    DOI: 10.22004/ag.econ.22184
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    References listed on IDEAS

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    1. Cotterill, Ronald W. & Rabinowitz, Adam N. & Tian, Li, 2002. "Milk Prices in New England and Neighboring Areas of New York: A Prologue to Action?," Research Reports 25152, University of Connecticut, Food Marketing Policy Center.
    2. Hausman, Jerry A & Leonard, Gregory K, 2002. "The Competitive Effects of a New Product Introduction: A Case Study," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 237-263, September.
    3. Dhar, Tirtha Pratim & Cotterill, Ronald W., 2002. "Two-Stage Oligopoly Pricing With Differentiated Product: The Boston Fluid Milk Market," 2002 Annual meeting, July 28-31, Long Beach, CA 19872, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Jerry A Hausman & Gregory K Leonard, 2002. "The Competitive Effects of a New Product Introduction: A Case Study," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 237-263, September.
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