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Brand-Supermarket Demand for Breakfast Cereals and Retail Competition

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  • Benaissa Chidmi
  • Rigoberto A. Lopez

Abstract

The Berry, Levinsohn, and Pakes (1995) market equilibrium model is extended to the supermarket chain level to examine consumer choices and retail competition for thirty-seven brands of breakfast cereals in Boston. Estimated taste parameters for product characteristics vary significantly across consumers. Although consumers are price-sensitive with respect to their chosen cereals, they exhibit strong brand and supermarket loyalty. Retail markups increase and marginal costs decrease with grocery market shares, attesting to oligopoly power with efficiencies. Markups decrease with the own-price elasticity of demand, with Corn Flakes having the highest markups. A detailed picture of consumer response and supermarket competition is provided. Copyright 2007, Oxford University Press.

Suggested Citation

  • Benaissa Chidmi & Rigoberto A. Lopez, 2007. "Brand-Supermarket Demand for Breakfast Cereals and Retail Competition," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 324-337.
    • Handle: RePEc:oup:ajagec:v:89:y:2007:i:2:p:324-337
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2007.00994.x
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    Cited by:

    1. 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.
    2. Jing Li & Edward C. Jaenicke & Tobenna D. Anekwe & Alessandro Bonanno, 2018. "Demand for ready‐to‐eat cereals with household‐level censored purchase data and nutrition label information: A distance metric approach," Agribusiness, John Wiley & Sons, Ltd., vol. 34(4), pages 687-713, October.
    3. 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.
    4. Thunström, Linda, 2008. "Food Consumption, Paternalism and Economic Policy," Umeå Economic Studies 739, Umeå University, Department of Economics.
    5. Gordon Jochem Klein & Ralph Bernd Siebert & Ralph Siebert, 2024. "Why Do Prices Differ Across Stores? Differential Competition Environments and Their Price Impacts," CESifo Working Paper Series 11344, CESifo.
    6. Eliaz, Kfir & Weisburd, Sarit & Oren-Kolbinger, Orli, 2017. "Limited Attention, Salience and Changing Prices: Evidence from a Field Experiment in Online Supermarket Shopping," CEPR Discussion Papers 12014, C.E.P.R. Discussion Papers.
    7. Ronald W. Cotterill, 2007. "Market Definition and Market Power in the British Supermarket Industry," Food Marketing Policy Center Research Reports 098, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    8. Linda Thunström, 2010. "Preference Heterogeneity and Habit Persistence: The Case of Breakfast Cereal Consumption," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(1), pages 76-96, February.
    9. Zhu, Chen & Lopez, Rigoberto A. & Liu, Xiaoou, 2019. "Consumer responses to front-of-package labeling in the presence of information spillovers," Food Policy, Elsevier, vol. 86(C), pages 1-1.
    10. Lin, Biing-Hwan & Dong, Diansheng & Carlson, Andrea & Rahkovsky, Ilya, 2017. "Potential dietary outcomes of changing relative prices of healthy and less healthy foods: The case of ready-to-eat breakfast cereals," Food Policy, Elsevier, vol. 68(C), pages 77-88.
    11. Lopez, Jose Antonio & Malaga, Jaime E. & Chidmi, Benaissa & Belasco, Eric J. & Surles, James, 2012. "Mexican Meat Demand at the Table Cut Level: Estimating a Censored Demand System in a Complex Survey," Journal of Food Distribution Research, Food Distribution Research Society, vol. 43(2), pages 1-27.
    12. Lopez, Jose A., 2016. "A Case Study of U.S. Fresh Tomato Trade among NAFTA Countries," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230045, Southern Agricultural Economics Association.
    13. Tchumtchoua, Sylvie & Dey, Dipak, 2007. "Semiparametric Bayesian Estimation of Random Coefficients Discrete Choice Models," Research Reports 149208, University of Connecticut, Food Marketing Policy Center.
    14. Blanchard Pablo, 2024. "Mark Ups and Pass-Through in Small and Medium Retailers for Rice, Tomato Sauce and Oil," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 22(1), pages 93-109.
    15. 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.
    16. Sanatan Shreay & Hayley H. Chouinard & Jill J. McCluskey, 2016. "Product Differentiation by Package Size," Agribusiness, John Wiley & Sons, Ltd., vol. 32(1), pages 3-15, January.
    17. Chen, Xuan & Liu, Yizao & Rabinowitz, Adam N., 2017. "Private Labels Competition, Retail Pricing and Bargaining Power: The Case of Fluid Milk Market," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252823, Southern Agricultural Economics Association.
    18. Cohen, Michael & Huang, Rui & Zhu, Chen, 2012. "The Use of Voluntary Marketing Initiatives to Improve the Nutritional Profile of Kids Cereals," Working Paper series 148344, University of Connecticut, Charles J. Zwick Center for Food and Resource Policy.
    19. Xuan, Chen & Rabinowitz, Adam & Liu, Yizao, 2016. "Private Labels Competition and Retailers Market Power: The Case of Fluid Milk Market in Connecticut," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235678, Agricultural and Applied Economics Association.
    20. 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.
    21. Lopez, Jose & Davis, Charade, 2015. "A Demand Analysis for Fresh Tomatoes in the Dallas/Fort Worth Grocery Market," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196847, Southern Agricultural Economics Association.
    22. Alessandro Bonanno & Carlo Russo & Luisa Menapace, 2018. "Market power and bargaining in agrifood markets: A review of emerging topics and tools," Agribusiness, John Wiley & Sons, Ltd., vol. 34(1), pages 6-23, December.

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