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Market-Structure Determinants Of National Brand-Private Label Price Differences Of Manufactured Food Products

  • Connor, John M.
  • Peterson, Everett B.

This paper estimates the relationships between market structure and the Lerner index of monopoly constructed from price data on processed food products sold through grocery stores. A theoretical model of a differentiated oligopoly specifies two determinants of price-cost margins: the Herfindahl-Hirschman index of seller concentration adjusted for the elasticity of demand and the industry advertising-to-sales ratio. The results indicate that the three principal determinants of price-cost margin variation, in order of their impacts, are: advertising intensity, elasticity of demand, and concentration. Previous structure-performance studies that did not incorporate the elasticity of demand were probably misspecified.

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Paper provided by Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance in its series Working Papers with number 116099.

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Date of creation: Oct 1991
Date of revision:
Handle: RePEc:ags:rpspwp:116099
Contact details of provider: Postal: Draper Hall, College of Food and Natural Resources, Amherst, MA 01003
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  1. Pagoulatos, Emilio & Sorensen, Robert, 1986. "What determines the elasticity of industry demand?," International Journal of Industrial Organization, Elsevier, vol. 4(3), pages 237-250, September.
  2. Connor, John M. & Peterson, Everett B., 1991. "Market-Structure Determinants Of National Brand-Private Label Price Differences Of Manufactured Food Products," Working Papers 116099, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
  3. Porter, Michael E, 1976. "Interbrand Choice, Media Mix and Market Performance," American Economic Review, American Economic Association, vol. 66(2), pages 398-406, May.
  4. Joseph E. Stiglitz & G. Frank Mathewson (ed.), 1986. "New Developments in the Analysis of Market Structure," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262690934, June.
  5. Nickell, Stephen J & Metcalf, David, 1978. "Monopolistic Industries and Monopoly Profits or, Are Kellogg's Cornflakes Overpriced?," Economic Journal, Royal Economic Society, vol. 88(350), pages 254-68, June.
  6. Cowling, Keith & Waterson, Michael, 1976. "Price-Cost Margins and Market Structure," Economica, London School of Economics and Political Science, vol. 43(171), pages 267-74, August.
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