Market Structure, Cost Pass-Through and Welfare with Differentiated Products
AbstractIn this paper, we estimate a mixed logit model for the U.S. processed cheese market and implement cost pass-through simulations and related consumer welfare analysis under different regimes of competition. In the model, the curvature of demand is determined to a significant extent by the empirical distribution of consumers. This property reduces the prediction errors of cost pass-through caused by an erroneous assumption as to the functional form of demand. We find that, under collusion, the pass-through rates for all brands fall between 23% and 37% and under Nash price competition, the range of pass-through is 67% ~ 98%.
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Bibliographic InfoPaper provided by Research Institute, International University of Japan in its series Working Papers with number EMS_2006_05.
Length: 29 pages
Date of creation: Jan 2006
Date of revision:
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Market Structure; Cost Pass-Through; Consumer Welfare; Mixed Logit;
Find related papers by JEL classification:
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- D60 - Microeconomics - - Welfare Economics - - - General
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
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