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Estimation of the Effects of New Brands on Incumbents’ Profits and Consumer Welfare: The U.S. Processed Cheese Market Case

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  • Donghun Kim

Abstract

I estimate the effects of new brands on market competition and consumer welfare in the U.S. processed cheese market. I find that an observed increase in consumer welfare was attributable mainly to an increase in the number of brands in the sample market, while the price effect, which measures welfare change caused by adding new brands to existing brands, decreased welfare as the prices of the existing brands increased in a large portion of sample markets. The price increase was most pronounced among the introducer’s existing brands. I also find that the data used in the paper identify a significant enhancement of consumer welfare as a result of the change in product characteristics provided by new brands even if a large portion of welfare gain is explained by the assumption on the error term in the utility function. Copyright Kluwer Academic Publishers 2004

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  • Donghun Kim, 2004. "Estimation of the Effects of New Brands on Incumbents’ Profits and Consumer Welfare: The U.S. Processed Cheese Market Case," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 25(3), pages 275-293, September.
    • Handle: RePEc:kap:revind:v:25:y:2004:i:3:p:275-293
    DOI: 10.1007/s11151-004-3172-6
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    1. Freyberger, Joachim, 2015. "Asymptotic theory for differentiated products demand models with many markets," Journal of Econometrics, Elsevier, vol. 185(1), pages 162-181.
    2. Cotterill, Ronald W., 2006. "Antitrust analysis of supermarkets: global concerns playing out in local markets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(1), pages 1-16, March.
    3. Yanghao Wang & Metin Çakır, 2020. "Welfare impacts of new demand‐enhancing agricultural products: The case of Honeycrisp apples," Agricultural Economics, International Association of Agricultural Economists, vol. 51(3), pages 445-457, May.
    4. Ronald W. Cotterill, 2005. "Antitrust Analysis of Supermarket Retailing: Common Global Concerns that Play Out in Local Markets," Food Marketing Policy Center Research Reports 088, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    5. Kiesel Kristin & Villas-Boas Sofia B, 2007. "Got Organic Milk? Consumer Valuations of Milk Labels after the Implementation of the USDA Organic Seal," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 5(1), pages 1-40, April.
    6. Joachim Freyberger, 2012. "Asymptotic theory for differentiated products demand models with many markets," CeMMAP working papers 19/12, Institute for Fiscal Studies.
    7. Elena Lopez & Rigoberto A. Lopez, 2009. "Demand for differentiated milk products: implications for price competition," Agribusiness, John Wiley & Sons, Ltd., vol. 25(4), pages 453-465.
    8. Joachim Freyberger, 2012. "Asymptotic theory for differentiated products demand models with many markets," CeMMAP working papers CWP19/12, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    9. Lacaze, María Victoria & González, Julia, 2018. "New goods with new attributes: combining revealed and stated preferences to assess the effect of a novel quality label in the food industry," Nülan. Deposited Documents 2976, Universidad Nacional de Mar del Plata, Facultad de Ciencias Económicas y Sociales, Centro de Documentación.
    10. Villas-Boas, Sofia B & Bonnet, Celine & Hilger, James, 2017. "RUM, WINE, and EXPERTS," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt160178v4, Department of Agricultural & Resource Economics, UC Berkeley.
    11. Unknown, 2005. "Antitrust Analysis of Supermarket Retailing: Common Global Concerns that Play Out in Local Markets," 2005 Conference (49th), February 9-11, 2005, Coff's Harbour, Australia 137831, Australian Agricultural and Resource Economics Society.
    12. Xiao, Wei, 2008. "The Competitive and Welfare Effects of New Product Introduction: The Case of Crystal Pepsi," Research Reports 149938, University of Connecticut, Food Marketing Policy Center.
    13. William Allender & Timothy Richards, 2010. "Market Diversion and Market Power: California Eggs," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(1), pages 37-58, February.
    14. Inge Geyskens & Barbara Deleersnyder & Marnik G. Dekimpe & Didi Lin, 2024. "Do consumers benefit from national-brand listings by hard discounters?," Journal of the Academy of Marketing Science, Springer, vol. 52(1), pages 97-118, January.
    15. He, Wentao & Hao, Xiaoli, 2023. "Competition and welfare effects of introducing new products into the new energy vehicle market: Empirical evidence from Tesla’s entry into the Chinese market," Transportation Research Part A: Policy and Practice, Elsevier, vol. 174(C).

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