Market Power and the Demsetz Quality Critique: An Evaluation for Food Retailing
This study analyzes supermarket firm prices to determine whether prices are related to market structure and whether the Demsetz quality critique is valid. Factor analysis is used to identify five service factors that are modeled with price as endogenous variables in a simultaneous equations framework to test whether a more concentrated market structure is related to higher service levels which, in turn, are related to higher prices (the Demsetz hypothesis) and whether a more concentrated market structure is directly related to higher price (market power hypothesis). For this study of supermarkets in 34 local markets in six southwestern states, market share and concentration are not significantly related to any service factors. Concentration has a significant positive relationship with price in the full sample, and share also is significantly related to price in subsamples of large, leading firms. Thus, the Demsetz critique is rejected. Other factors that affect price include store format, whether a firm competes against warehouse supermarkets, store cost, and market demand factors.
|Date of creation:||1994|
|Date of revision:|
|Contact details of provider:|| Postal: 1376 Storrs Road, U-21, Storrs, Connecticut 06269-4021|
Web page: http://www.zwickcenter.uconn.edu
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nelson, Philip & Siegfried, John J & Howell, John, 1992. "A Simultaneous Equations Model of Coffee Brand Pricing and Advertising," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 54-63, February.
- MacDonald, James M. & Nelson, Paul Jr., 1991. "Do the poor still pay more? Food price variations in large metropolitan areas," Journal of Urban Economics, Elsevier, vol. 30(3), pages 344-359, November.
- Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter.
- Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
- Hall, Lana & Schmitz, Andrew & Cothern, James, 1979. "Beef Wholesale-Retail Marketing Margins and Concentration," Economica, London School of Economics and Political Science, vol. 46(183), pages 295-300, August.
- Evans, William N & Froeb, Luke M & Werden, Gregory J, 1993. "Endogeneity in the Concentration-Price Relationship: Causes, Consequences, and Cures," Journal of Industrial Economics, Wiley Blackwell, vol. 41(4), pages 431-38, December.
When requesting a correction, please mention this item's handle: RePEc:zwi:fpcrep:029. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.