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Market-Structure Determinants of National Brand-Private Label Price Differences of Manufactured Food Products

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  • Connor, John M
  • Peterson, Everett B

Abstract

This paper estimates the relationships between market structure and the Lerner index of monopoly constructed from price data on processed food products sold through grocery stores. A theoretical model of a differentiated oligopoly specifies two determinants of price-cost margins: the Herfindahl-Hirschman index of seller concentration adjusted for the elasticity of demand and the industry advertising-to-sales ratio. The results indicate that the three principal determinants of price-cost margin variation, in order of their impacts, are: advertising intensity, elasticity of demand, and concentration. Previous structure-performance studies that did not incorporate the elasticity of demand, and concentration. Previous structure-performance studies that did not incorporate the elasticity of demand were probably misspecified. Copyright 1992 by Blackwell Publishing Ltd.

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  • Connor, John M & Peterson, Everett B, 1992. "Market-Structure Determinants of National Brand-Private Label Price Differences of Manufactured Food Products," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 157-171, June.
  • Handle: RePEc:bla:jindec:v:40:y:1992:i:2:p:157-71
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    as
    1. Connor, John M & Peterson, Everett B, 1992. "Market-Structure Determinants of National Brand-Private Label Price Differences of Manufactured Food Products," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 157-171, June.
    2. A. Desmond O'Rourke & W. Smith Greig, 1981. "Estimates of Consumer Loss Due to Monopoly in the U.S. Food-Manufacturing Industries: Comment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 63(2), pages 285-289.
    3. John M. Connor & Scott Weimer, 1986. "The intensity of advertising and other selling expenses in food and tobacco manufacturing: Measurement, determinants, and impacts," Agribusiness, John Wiley & Sons, Ltd., vol. 2(3), pages 293-319.
    4. Hamm, Larry G., 1981. "The Impact of Food Distributor Procurement Practices on food System Structure and Coordination," Working Papers 202964, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    5. Nickell, Stephen J & Metcalf, David, 1978. "Monopolistic Industries and Monopoly Profits or, Are Kellogg's Cornflakes Overpriced?," Economic Journal, Royal Economic Society, vol. 88(350), pages 254-268, June.
    6. Bhagwati, Jagdish N, 1970. "Oligopoly Theory, Entry-prevention, and Growth," Oxford Economic Papers, Oxford University Press, vol. 22(3), pages 297-310, November.
    7. Joseph E. Stiglitz & G. Frank Mathewson (ed.), 1986. "New Developments in the Analysis of Market Structure," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262690934, December.
    8. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2, May.
    9. repec:bla:econom:v:43:y:1976:i:171:p:267-74 is not listed on IDEAS
    10. John M. Connor, 1981. "Food Product Proliferation: A Market Structure Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 63(4), pages 607-617.
    11. Porter, Michael E, 1976. "Interbrand Choice, Media Mix and Market Performance," American Economic Review, American Economic Association, vol. 66(2), pages 398-406, May.
    12. Pagoulatos, Emilio & Sorensen, Robert, 1986. "What determines the elasticity of industry demand?," International Journal of Industrial Organization, Elsevier, vol. 4(3), pages 237-250, September.
    13. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
    14. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1, May.
    15. Schmalensee, Richard, 1989. "Inter-industry studies of structure and performance," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 16, pages 951-1009, Elsevier.
    16. A. P. Lerner, 1934. "The Concept of Monopoly and the Measurement of Monopoly Power," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 1(3), pages 157-175.
    17. J. N. Bhagwati, 1970. "Oligopoly Theory, Entry-Prevention and Growth," Working papers 47, Massachusetts Institute of Technology (MIT), Department of Economics.
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