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Market Power, Brand Characteristics and Demand for Retail Grocery Products

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  • Paul H. Jensen

    () (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • Elizabeth Webster

    () (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

This paper examines the effects of market power and product differentiation on demand for grocery products in Australia over the period 2002 to 2005. We construct a model of the relationship between demand, market power and brand characteristics and then estimate the model using monthly data on price, quantity and volume sold for a bundle of 92 brands in 12 product categories from major supermarket stores across Australia. We also use data on the characteristics of each brand such as whether the product is environment-friendly, is a “private label”, or is made from recyclable materials. Our results suggest that firms are able to affect their demand curves through both product differentiation strategies and through market power.

Suggested Citation

  • Paul H. Jensen & Elizabeth Webster, 2006. "Market Power, Brand Characteristics and Demand for Retail Grocery Products," Melbourne Institute Working Paper Series wp2006n05, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  • Handle: RePEc:iae:iaewps:wp2006n05
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    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2006n05.pdf
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    References listed on IDEAS

    as
    1. Wiggins, Steven N & Raboy, David G, 1996. "Price Premia to Name Brands: An Empirical Analysis," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 377-388, December.
    2. Hurwitz, Mark A & Caves, Richard E, 1988. "Persuasion or Information? Promotion and the Shares of Brand Name and Generic Pharmaceuticals," Journal of Law and Economics, University of Chicago Press, vol. 31(2), pages 299-320, October.
    3. William E. Griffiths & Paul H. Jensen & Elizabeth Webster, 2005. "The Effects on Firm Profits of the Stock of Intellectual Property Rights," Melbourne Institute Working Paper Series wp2005n04, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    4. Jagmohan S. Raju & Raj Sethuraman & Sanjay K. Dhar, 1995. "The Introduction and Performance of Store Brands," Management Science, INFORMS, vol. 41(6), pages 957-978, June.
    5. Png, I P L & Reitman, David, 1995. "Why Are Some Products Branded and Others Not?," Journal of Law and Economics, University of Chicago Press, vol. 38(1), pages 207-224, April.
    6. H. Leibenstein, 1950. "Bandwagon, Snob, and Veblen Effects in the Theory of Consumers' Demand," The Quarterly Journal of Economics, Oxford University Press, vol. 64(2), pages 183-207.
    7. Scott Morton, Fiona M., 2000. "Barriers to entry, brand advertising, and generic entry in the US pharmaceutical industry," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 1085-1104, October.
    8. Asher Wolinsky, 1983. "Prices as Signals of Product Quality," Review of Economic Studies, Oxford University Press, vol. 50(4), pages 647-658.
    9. Carl Shapiro, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, Oxford University Press, vol. 98(4), pages 659-679.
    10. Elizabeth Webster & Paul H. Jensen, 2004. "Patterns of Trademarking Activity in Australia," Melbourne Institute Working Paper Series wp2004n02, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
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