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

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  • 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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Keywords: market structure; strategic pricing; conjectural variations; price reaction; carbonated soft drinks; Demand and Price Analysis;

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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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