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An Econometric Analysis of Brand Level Strategic Pricing Between Coca Cola and Pepsi Inc

Author Info

  • Tirtha Pratim Dhar
  • Jean-Paul Chavas
  • Ronald W. Cotterill
  • Brian W. Gould

Abstract

Market structure and strategic pricing for leading brands sold by Coca Cola and Pepsi Inc. are investigated in the context of a flexible demand specification and structural price equations. This approach is more general than prior studies that rely upon linear approximations and interactions of an inherently nonlinear problem. We test for Bertrand equilibrium, Stackelberg equilibrium, collusion, and a general conjectural variation (CV) specification. This nonlinear Full Information Maximum Likelihood (FIML) estimation approach provides useful information on the nature of imperfect competition and the extent of market power.

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File URL: http://fmpc.uconn.edu/publications/rr/rr65.pdf
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Paper provided by University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy in its series Food Marketing Policy Center Research Reports with number 065.

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Date of creation: 2002
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Handle: RePEc:zwi:fpcrep:065
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Web page: http://www.zwickcenter.uconn.edu
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Keywords: market structure; strategic pricing; conjectural variations; price reaction; carbonated soft drinks; Demand and Price Analysis;

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  1. Aviv Nevo, 1998. "Measuring Market Power in the Ready-to-Eat Cereal Industry," NBER Working Papers 6387, National Bureau of Economic Research, Inc.
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  5. Moschini, GianCarlo, 1995. "Units of Measurement and the 'Stone Index' In Demand System Estimation," Staff General Research Papers 5058, Iowa State University, Department of Economics.
  6. Golan, Amos & Karp, Larry & Perloff, Jeffrey M., 1999. "Estimating Coke and Pepsi's price and advertising strategies," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6rf8j6m4, Department of Agricultural & Resource Economics, UC Berkeley.
  7. Richard Blundell & Robin, J M, 1995. "Latent separability: grouping goods without weak separability," IFS Working Papers W95/09, Institute for Fiscal Studies.
  8. Cotterill, Ronald W. & Franklin, Andrew W. & Ma, Li Yu, 1996. "Measuring Market Power Effects in Differentiated Product Industries: An Application to the Soft Drink Industry," Research Reports 25229, University of Connecticut, Food Marketing Policy Center.
  9. Cotterill, Ronald W., 1994. "Scanner Data: New Opportunities For Demand And Competitive Strategy Analysis," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 23(2), October.
  10. Alston, Julian M & Foster, Kenneth A & Green, Richard D, 1994. "Estimating Elasticities with the Linear Approximate Almost Ideal Demand System: Some Monte Carlo Results," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 351-56, May.
  11. Kadiyali, Vrinda & Vilcassim, Naufel J & Chintagunta, Pradeep K, 1996. "Empirical Analysis of Competitive Product Line Pricing Decisions: Lead, Follow, or Move Together?," The Journal of Business, University of Chicago Press, vol. 69(4), pages 459-87, October.
  12. Cotterill, Ronald W & Putsis, William P, Jr & Dhar, Ravi, 2000. "Assessing the Competitive Interaction between Private Labels and National Brands," The Journal of Business, University of Chicago Press, vol. 73(1), pages 109-37, January.
  13. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-22, February.
  14. J. Miguel Villas-Boas & Russell S. Winer, 1999. "Endogeneity in Brand Choice Models," Management Science, INFORMS, vol. 45(10), pages 1324-1338, October.
  15. McElroy, Marjorie B., 1977. "Goodness of fit for seemingly unrelated regressions : Glahn's R2y.x and Hooper's r2," Journal of Econometrics, Elsevier, vol. 6(3), pages 381-387, November.
  16. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
  17. Chen, Kevin Z., 1998. "The symmetric problem in the linear almost ideal demand system," Economics Letters, Elsevier, vol. 59(3), pages 309-315, June.
  18. Moschini, GianCarlo & Moro, D. & Green, Richard D., 1994. "Maintaining and Testing Separability in Demand Systems," Staff General Research Papers 11247, Iowa State University, Department of Economics.
  19. Ronald W. Cotterill & Andrew W. Franklin & Li Yu Ma, 1996. "Measuring Market Power Effects in Differentiated Product Industries: An Application to the Soft Drink Industry," Food Marketing Policy Center Research Reports 032, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
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Cited by:

  1. Richards, Timothy J. & Patterson, Paul M., 2006. "Firm-Level Competition in Price and Variety," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(03), December.
  2. Jad Chaaban & Alban Thomas, 2008. "A Structural Model for Evaluating the Sector-specific Impacts of Preferential Trade Agreements," Journal of Industry, Competition and Trade, Springer, vol. 8(1), pages 73-88, March.

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