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A Simultaneous Equations Model of Coffee Brand Pricing and Advertising

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  • Nelson, Philip
  • Siegfried, John J
  • Howell, John

Abstract

This paper explores the relationship between a differentiated brand's market share and its price in the context of a model that recognizes the endogeneity of the brand's advertising behavior and pricing decisions. The empirical analysis suggests that General Foods charged higher prices for its regular-grind Maxwell House coffee in geographic areas where the brand's market share was relatively large. Available cross-sectional, time-series data and company documents suggest that this empirical relationship is attributable to the preference grocery retailers have for putting dominant coffee brands on special, rather than cross-sectional variations in costs, market concentration, or consumer tastes. Copyright 1992 by MIT Press.

Suggested Citation

  • Nelson, Philip & Siegfried, John J & Howell, John, 1992. "A Simultaneous Equations Model of Coffee Brand Pricing and Advertising," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 54-63, February.
    • Handle: RePEc:tpr:restat:v:74:y:1992:i:1:p:54-63
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    Citations

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    Cited by:

    1. Ronald W. Cotterill, 1999. "Market power and the Demsetz quality critique: An evaluation for food retailing," Agribusiness, John Wiley & Sons, Ltd., vol. 15(1), pages 101-118.
    2. Robert DeYoung & Evren Ors, 2004. "Advertising and pricing at multiple-output firms: evidence from U.S. thrift institutions," Working Paper Series WP-04-25, Federal Reserve Bank of Chicago.
    3. Feuerstein, Switgard, 2002. "Do coffee roasters benefit from high prices of green coffee?," International Journal of Industrial Organization, Elsevier, vol. 20(1), pages 89-118, January.
    4. Haller, Lawrence E. & Cotterill, Ronald W., 1996. "Evaluating Traditional Share-Price and Residual Demand Measures of Market Power in the Catsup Industry," Research Reports 25193, University of Connecticut, Food Marketing Policy Center.
    5. Judith A. Chevalier & Anil K. Kashyap & Peter E. Rossi, 2003. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," American Economic Review, American Economic Association, vol. 93(1), pages 15-37, March.
    6. Requena-Silvente, Francisco & Walker, James, 2007. "Investigating sales and advertising rivalry in the UK multipurpose vehicle market (1995-2002)," Journal of Economics and Business, Elsevier, vol. 59(2), pages 163-180.
    7. Paulo Albuquerque & Bart J. Bronnenberg, 2009. "Estimating Demand Heterogeneity Using Aggregated Data: An Application to the Frozen Pizza Category," Marketing Science, INFORMS, vol. 28(2), pages 356-372, 03-04.
    8. Peter Scott & James Walker, 2009. "Sales and Advertising Rivalry in Interwar US Department Stores," Economics Discussion Papers em-dp2009-05, Department of Economics, University of Reading.
    9. Declerck, Francis, 2005. "Typology and Financial Performance of Champagne Makers According to Distribution Channel," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 8(4), pages 1-22.
    10. Ryo Sakamoto & Kyle Stiegert, 2018. "Comparing competitive toughness to benchmark outcomes in retail oligopoly pricing," Agribusiness, John Wiley & Sons, Ltd., vol. 34(1), pages 44-60, December.
    11. Nicolas Vaillant & Philippe Lesot & Quentin Bonnard & Valerie Harrant, 2010. "The use of expert opinion, quality and reputation indicators by consumers: evidence from the French vaulting stallion semen market," Applied Economics, Taylor & Francis Journals, vol. 42(6), pages 739-745.
    12. Zheng, Yuqing & Kaiser, Harry M., 2008. "Advertising and U. S. Nonalcoholic Beverage Demand," Agricultural and Resource Economics Review, Cambridge University Press, vol. 37(2), pages 147-159, October.

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