Measuring market power in the ready-to-eat cereal industry

• 成果类型: Article
• 署名作者: Nevo, A
• 署名单位: University of California System; University of California Berkeley
• 刊物名称: ECONOMETRICA
• ISSN/ISSBN: 0012-9682
• DOI: 10.1111/1468-0262.00194
• 发表日期: 2001
• 页码: 307-342
• 关键词: american automobile-industry; discrete-choice models; differentiated-products; econometric-analysis

摘要

The ready-to-eat cereal industry is characterized by high concentration, high price-cost margins, large advertising-to-sales ratios, acid numerous introductions of new products. Previous researchers have concluded that the ready-to-eat cereal industry is a classic example of an industry with nearly collusive pricing behavior and intense nonprice competition. This paper empirically examines this conclusion. In particular, I estimate price-cost margins, but more importantly I am able empirically to separate these margins into three sources: (i) that which is due to product differentiation: (ii) that which is due to multi-product firm pricing; and (iii) that due to potential price collusion. The results suggest that given the demand for different brands of cereal, the first two effects explain most of the observed price-cost margins. I conclude that prices in the industry are consistent with noncollusive pricing behavior, despite the high price-cost margins. Leading firms are able to maintain a portfolio of differentiated products and influence the perceived product quality. It is these two factors that lead to high price-cost margins.