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Price Transmission in Differentiated Product Market Channels: A Study of the Boston Fluid Milk Market and the North East Dairy Compact

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Author Info
Dhar, Tirtha P.
Cotterill, Ronald W.
Abstract

This study develops a two-stage market channel model to analyze pricing in the Boston milk market where retailers are differentiated sellers. A nonlinear model of demand and costs, including firm specific and industry cost shift variables is estimated for each of the four leading supermarkets. Cost pass through rates for industry wide shifts are near 100%; for firm specific costs they range between 32 and 47 percent, suggesting that substantial differentiation and related market power. A test for focal point collusion finds that channel firms elevated retail prices when the Northeast Dairy Compact elevated and stabilized raw milk prices.

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Publisher Info
Paper provided by University of Connecticut, Food Marketing Policy Center in its series Research Reports with number 25174.

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Date of creation: 2002
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Handle: RePEc:ags:uconnr:25174

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Related research
Keywords: price transmission; industry versus firm specific cost inputs; differentiated product oligopoly; focal point collusion; Demand and Price Analysis; Industrial Organization;

References listed on IDEAS
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  1. Cotterill, Ronald W & Putsis, William P, Jr & Dhar, Ravi, 2000. "Assessing the Competitive Interaction between Private Labels and National Brands," Journal of Business, University of Chicago Press, vol. 73(1), pages 109-37, January. [Downloadable!] (restricted)
  2. Timothy Dunne & Mark J Roberts, 1992. "Costs, Demand, and Imperfect Competition as Determinants of Plant_level Output Prices," Working Papers 92-5, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  3. Karp, Larry S & Perloff, Jeffrey M, 1989. "Estimating Market Structure and Tax Incidence: The Japanese Television Market," Journal of Industrial Economics, Blackwell Publishing, vol. 37(3), pages 225-39, March. [Downloadable!] (restricted)
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  4. S. McCorriston & C. W. Morgan & A. J. Rayner, 1998. "Processing Technology, Market Power and Price Transmission," Journal of Agricultural Economics, Blackwell Publishing, vol. 49(2), pages 185-201. [Downloadable!] (restricted)
  5. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September. [Downloadable!] (restricted)
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  6. Schroeter, John R. & Azzam, Azzeddine, 2003. "Marketing Margins, Market Power, and Price Uncertainty," Staff General Research Papers 11110, Iowa State University, Department of Economics.
  7. John Freebairn & Bill Griffiths, 2006. "Introduction," The Economic Record, The Economic Society of Australia, vol. 82(s1), pages S1-S1, 09. [Downloadable!] (restricted)
  8. Slade, Margaret E, 1995. "Product Rivalry with Multiple Strategic Weapons: An Analysis of Price and Advertising Competition," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 4(3), pages 445-76, Fall.
  9. Baker, Jonathan B. & Bresnahan, Timothy F., 1988. "Estimating the residual demand curve facing a single firm," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 283-300. [Downloadable!] (restricted)
  10. Borenstein, Severin & Cameron, A Colin & Gilbert, Richard, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 305-39, February.
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