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Product differentiation and cost pass-through

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Listed:
  • Loy, Jens-Peter
  • Glauben, Thomas

Abstract

Many food products show a high level of vertical and horizontal product differentiation. Manufacturers may instrument product differentiation to limit competition and to increase price dispersion. In this paper, we estimate a panel error correction cost pass-through model for the German yoghurt market over a six year period (t = 312) to determine the impact of product differentiation on price competition between individual brands and varieties of yoghurt. We find that more differentiated products show higher markups, reduced equilibrium cost pass-through and lower speed of cost-price adjustments. The results indicate that manufacturers (and/or retailers) use product differentiation to limit price competition.

Suggested Citation

  • Loy, Jens-Peter & Glauben, Thomas, 2016. "Product differentiation and cost pass-through," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235400, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea16:235400
    DOI: 10.22004/ag.econ.235400
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    Keywords

    Agribusiness; Demand and Price Analysis; Industrial Organization;

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