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Demand for Differentiated Milk Products: Implications for Price Competition

Author

Listed:
  • Elena Lopez

    (University of Alcalá)

  • Rigoberto A. Lopez

    (University of Connecticut)

Abstract

This article uses a discrete choice, random coefficients logit model for analyzing consumer behavior and retail price competition in the Boston fluid milk market. The problems of product dimensionality and consumer heterogeneity implied by imperfect substitution in markets with differentiated products were solved by applying the model of Berry, Levinhson and Pakes (1995). Empirical results show that private label milks have the highest markups in spite of lower prices, which may explain their rapid expansion, while low-fat and specialty milks such as organic and lactose-free are preferred by high income groups with no children.

Suggested Citation

  • Elena Lopez & Rigoberto A. Lopez, 2008. "Demand for Differentiated Milk Products: Implications for Price Competition," Food Marketing Policy Center Research Reports 104, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    • Handle: RePEc:zwi:fpcrep:104
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    File URL: http://fmpc.uconn.edu/publications/rr/rr104.pdf
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    Cited by:

    1. Rodolfo Bernabéu & Margarita Brugarolas & Laura Martínez-Carrasco & Roberto Nieto-Villegas & Adrián Rabadán, 2023. "The Price of Organic Foods as a Limiting Factor of the European Green Deal: The Case of Tomatoes in Spain," Sustainability, MDPI, vol. 15(4), pages 1-15, February.
    2. Li, Xun & Lopez, Rigoberto A., 2015. "Energy Price Transmission and Retail Milk Prices," Working Papers 38, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    3. Yizao Liu & Xuan Chen & Adam N. Rabinowitz & Benjamin Campbell, 2020. "Demand, challenges, and marketing strategies in the retail promotion of local brand milk," Agricultural Economics, International Association of Agricultural Economists, vol. 51(5), pages 655-668, September.
    4. Khanal, Binod & Lopez, Rigoberto, 2021. "Demand for Plant Based Beverages and Market Competition in Fluid Milk Markets," 2021 Conference, August 17-31, 2021, Virtual 315369, International Association of Agricultural Economists.
    5. Roosen, Jutta & Staudigel, Matthias & Rahbauer, Sebastian, 2022. "Demand elasticities for fresh meat and welfare effects of meat taxes in Germany," Food Policy, Elsevier, vol. 106(C).
    6. Lopez, Rigoberto A. & Khanal, Binod, 2020. "Got Local? Demand for Milk with Food Miles," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304354, Agricultural and Applied Economics Association.
    7. Daum Kim & Kohya Takahashi & Koshi Maeda, 2025. "Effects of health claims on demand structure and market power: The case of the yogurt market in Japan," Agribusiness, John Wiley & Sons, Ltd., vol. 41(3), pages 833-855, July.
    8. Heng, Yan & Peterson, Hikaru, 2014. "Estimating Demand for Differentiated Eggs Using Scanner Data," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170457, Agricultural and Applied Economics Association.
    9. Holzer, Patrick Sebastian, 2020. "The effect of time-varying factors on promotional activity in the German milk market," Journal of Retailing and Consumer Services, Elsevier, vol. 55(C).
    10. Ghazaryan, Armen & Bonanno, Alessandro & Carlson, Andrea, 2023. "I Say Milk, You Say Mylk. Demand Separability in a Broadened Milk Category," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 48(2), May.
    11. Stefan Hirsch & Giulia Tiboldo & Rigoberto A. Lopez, 2018. "A tale of two Italian cities: brand-level milk demand and price competition," Applied Economics, Taylor & Francis Journals, vol. 50(49), pages 5239-5252, October.
    12. Xun Li & Rigoberto Lopez & Shuai Yang, 2018. "Energy†milk price transmission at the product brand level," Agricultural Economics, International Association of Agricultural Economists, vol. 49(3), pages 289-299, May.
    13. Wu, Xiang & Xiong, Jie & Li, Haitao & Wu, Han, 2019. "The myth of retail pricing policy for developing organic vegetable markets," Journal of Retailing and Consumer Services, Elsevier, vol. 51(C), pages 8-13.
    14. Julia Hoffmann & Julia Bronnmann, 2019. "Bottle size matters: Heterogeneity in the German carbonated soft drink market," Agribusiness, John Wiley & Sons, Ltd., vol. 35(4), pages 556-573, October.
    15. Jessica Aschemann-Witzel & Stephan Zielke, 2017. "Can't Buy Me Green? A Review of Consumer Perceptions of and Behavior Toward the Price of Organic Food," Journal of Consumer Affairs, Wiley Blackwell, vol. 51(1), pages 211-251, March.
    16. Mohammed, Rezgar & Murova, Olga & Chidmi, Benaissa, 2017. "Demand for Yogurt in the Trend of Manufacturer Brand and Organic Information," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252728, Southern Agricultural Economics Association.
    17. Julia González & M. Victoria Lacaze, 2012. "Preferences, Market Structure, and Welfare Evaluations in the Argentinean FFP Industry: A Case in Buenos Aires Province," Agribusiness, John Wiley & Sons, Ltd., vol. 28(3), pages 341-360, June.
    18. Lopez Elena & Lopez Rigoberto A., 2017. "Introduction to the Special Issue in Honor of Professor Emilio Pagoulatos," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 15(2), pages 1-5, December.
    19. Tiboldo, Giulia & Lopez, Rigoberto & Hirsch, Stefan, 2016. "Private label market power: evidence from Italian dairy retailing," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235592, Agricultural and Applied Economics Association.
    20. Hovhannisyan, Vardges & Stiegert, Kyle W., 2011. "Vertical Channel Analysis of the U.S. Milk Market," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103631, Agricultural and Applied Economics Association.
    21. Tiboldo, G. & Castellari, E. & Moro, D., 2024. "The distributional implications of health taxes: A case study on the Italian sugar tax," Food Policy, Elsevier, vol. 126(C).
    22. Bonnet, Céline & Corre, Tifenn & Réquillart, Vincent, 2015. "Price Transmission in Food Chains: The Case of the Dairy Industry," TSE Working Papers 15-563, Toulouse School of Economics (TSE).
    23. Vardges Hovhannisyan & Marin Bozic, 2014. "Retailer Motivation to Adjust Milk Prices: An Analysis Using Superelasticity of Demand," Agribusiness, John Wiley & Sons, Ltd., vol. 30(2), pages 195-206, March.

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    Keywords

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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