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Demand and Pricing in the U.S. Margarine Industry

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  • Kim Donghun

    (International University of Japan)

Abstract

This paper provides estimates of U.S. demand for margarine and price-cost margins. Demand is estimated using a mixed logit model, which provides a flexible substitution pattern among products. We find that product characteristics, such as nutrient facts, package size and product forms, and household income and age composition are important determinants of demand for margarine. The estimated product-level price elasticities, which are defined as the percent change in market share corresponding to a one percent change in price, range from -1.85 to -6.34, while the cross-price elasticities vary from 0.01 to 0.98. The estimated price-cost margins vary from 28 percent to 58 percent depending on the assumption of industry conduct.

Suggested Citation

  • Kim Donghun, 2008. "Demand and Pricing in the U.S. Margarine Industry," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(1), pages 1-19, March.
    • Handle: RePEc:bpj:bjafio:v:6:y:2008:i:1:n:1
    DOI: 10.2202/1542-0485.1211
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    References listed on IDEAS

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    1. Amil Petrin, 2002. "Quantifying the Benefits of New Products: The Case of the Minivan," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 705-729, August.
    2. Nevo, Aviv, 2001. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Econometrica, Econometric Society, vol. 69(2), pages 307-342, March.
    3. Aviv Nevo, 2003. "New Products, Quality Changes, and Welfare Measures Computed from Estimated Demand Systems," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 266-275, May.
    4. Trajtenberg, Manuel, 1989. "The Welfare Analysis of Product Innovations, with an Application to Computed Tomography Scanners," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 444-479, April.
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    Cited by:

    1. Shinn‐Shyr Wang & Kyle W. Stiegert & Tirtha P. Dhar, 2010. "Strategic Pricing Behavior under Asset Value Maximization," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 58(2), pages 151-170, June.
    2. Xiao Meng & Edward C. Jaenicke, 2021. "Welfare analysis of introducing private label packaged salads into the US market," Agribusiness, John Wiley & Sons, Ltd., vol. 37(3), pages 650-664, July.

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