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Rivalry in Price and Location by Differentiated Product Manufacturers

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  • Timothy J. Richards
  • William J. Allender
  • Stephen F. Hamilton

Abstract

In this article, we estimate a model of strategic rivalry between food manufacturers in product design and pricing. We derive a spatial structural model in which food manufacturers jointly select prices and the optimal attribute composition of their product lines. We find that manufacturers have an incentive to locate yogurt products nearby others in attribute space and that products with the most similar attribute compositions enjoy the widest price-cost margins. Our findings explain the observation that most consumer package goods tend to be very similar, yet manufacturers appear to earn above-normal profits. Copyright 2013, Oxford University Press.

Suggested Citation

  • Timothy J. Richards & William J. Allender & Stephen F. Hamilton, 2013. "Rivalry in Price and Location by Differentiated Product Manufacturers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(3), pages 650-668.
    • Handle: RePEc:oup:ajagec:v:95:y:2013:i:3:p:650-668
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    File URL: http://hdl.handle.net/10.1093/ajae/aas137
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    Citations

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    Cited by:

    1. Jinho Jung & Juan Sesmero & Ralph Siebert, 2020. "Spatial Differentiation and Market Power in Input Procurement: Evidence from a Structural Model of the Corn Market," CESifo Working Paper Series 8088, CESifo.
    2. Genakos, Christos & Kretschmer, Tobias & Nicolle, Ambre, 2021. "Strategic confusopoly: evidence from the UK mobile market," LSE Research Online Documents on Economics 113835, London School of Economics and Political Science, LSE Library.
    3. Staudigel, Matthias & Anders, Sven, 2020. "Effects of the FDA's sodium reduction strategy in the U.S. market for chip products," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 216-238.
    4. Richards, Timothy J. & Hamilton, Stephen F. & Empen, Janine, 2015. "Attribute Search in Online Retailing," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 202968, Agricultural and Applied Economics Association.
    5. Jung, Jinho & Sesmero, Juan Pablo & Balagtas, Joseph V., 2017. "Market Power in Feedstock Procurement and Economic Effects of Corn Ethanol," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258544, Agricultural and Applied Economics Association.
    6. Bittmann, Thomas & Loy, Jens-Peter & Anders, Sven, 2017. "Cost Pass-Through And Product Differentiation," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 261145, European Association of Agricultural Economists.
    7. repec:oup:ajagec:v:99:y:2017:i:1:p: is not listed on IDEAS
    8. Bittmann, Thomas & Bronnmann, Julia & Gordon, Daniel V., 2020. "Product differentiation and dynamics of cost pass-through in the German fish market: An error-correction-distance measure approach," Journal of Commodity Markets, Elsevier, vol. 19(C).
    9. Hajime Seya & Kay W. Axhausen & Makoto Chikaraishi, 2020. "Spatial unconditional quantile regression: application to Japanese parking price data," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 65(2), pages 351-402, October.

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