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

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

Abstract

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.

Suggested Citation

  • 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.
    • Handle: RePEc:ags:rpspwp:116099
    DOI: 10.22004/ag.econ.116099
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    References listed on IDEAS

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    1. Connor, John M & Peterson, Everett B, 1992. "Market-Structure Determinants of National Brand-Private Label Price Differences of Manufactured Food Products," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 157-171, June.
    2. John M. Connor & Scott Weimer, 1986. "The intensity of advertising and other selling expenses in food and tobacco manufacturing: Measurement, determinants, and impacts," Agribusiness, John Wiley & Sons, Ltd., vol. 2(3), pages 293-319.
    3. Schmalensee, Richard, 1989. "Inter-industry studies of structure and performance," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 16, pages 951-1009, Elsevier.
    4. Hamm, Larry G., 1981. "The Impact of Food Distributor Procurement Practices on food System Structure and Coordination," Working Papers 202964, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
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    Agribusiness; Demand and Price Analysis;

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