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High cereal prices and the prospects for relief by expansion of private label and antitrust enforcement

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  • Ronald W. Cotterill

    (Food Marketing Policy Center, Agricultural and Resource Economics, 1376 Storrs Road, U-21, Storrs, CT 06269-4021)

Abstract

This article responds to key points in the GMA Fact Sheet Analysis of cereal industry conduct and performance. It also explains the organization of the industry using research by Wall Street analysts that document high concentration, barriers to entry, and noncompetitive pricing games. The result is high price cost margins and high prices. The judge's decision in State of New York v. P. Morris Kraft General Foods et al. is critiqued. She relies upon a broad definition of competition that compromises the role of price in achieving allocative efficiency in markets. The new application of the antitrust laws to unilateral market power is explained. Finally the prospects for price relief through expansion of private label cereals, although complex, are reasonably good. [EconLit cites: L100, L410, L660] © 1999 John Wiley & Sons, Inc.

Suggested Citation

  • Ronald W. Cotterill, 1999. "High cereal prices and the prospects for relief by expansion of private label and antitrust enforcement," Agribusiness, John Wiley & Sons, Ltd., vol. 15(2), pages 229-245.
    • Handle: RePEc:wly:agribz:v:15:y:1999:i:2:p:229-245
    DOI: 10.1002/(SICI)1520-6297(199921)15:2<229::AID-AGR8>3.0.CO;2-7
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    References listed on IDEAS

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    1. Ronald W. Cotterill & Lawrence E. Haller, 1997. "An Econometric Analysis of the Demand for RTE Cereal: Product Market Definition and Unilateral Market Power Effects," Food Marketing Policy Center Research Reports 035, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    2. Langan, Glenn E. & Cotterill, Ronald W., 1994. "Estimating Brand Level Demand Elasticities and Measuring Market Power for Regular Carbonated Soft Drinks," Working Papers 116168, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
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    Cited by:

    1. Cotterill, Ronald W & Putsis, William P, Jr & Dhar, Ravi, 2000. "Assessing the Competitive Interaction between Private Labels and National Brands," The Journal of Business, University of Chicago Press, vol. 73(1), pages 109-137, January.
    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. Eliza M. Mojduszka & Julie A. Caswell & J. Michael Harris, 2001. "Consumer choice of food products and the implications for price competition and government policy," Agribusiness, John Wiley & Sons, Ltd., vol. 17(1), pages 81-104.
    4. Ronald Cotterill & William Putsis, 2000. "Market Share and Price Setting Behavior for Private Labels and National Brands," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 17(1), pages 17-39, August.
    5. Günter J. Hitsch, 2006. "An Empirical Model of Optimal Dynamic Product Launch and Exit Under Demand Uncertainty," Marketing Science, INFORMS, vol. 25(1), pages 25-50, 01-02.
    6. Gregory K. Price & John M. Connor, 2003. "Modeling coupon values for ready-to-eat breakfast cereals," Agribusiness, John Wiley & Sons, Ltd., vol. 19(2), pages 223-243.
    7. Richards, Timothy J. & Patterson, Paul M., 2002. "Strategic Interaction With Multiple Tools: A New Empirical Model," Working Papers 28545, Arizona State University, Morrison School of Agribusiness and Resource Management.
    8. Bergès-Sennou Fabian & Bontems Philippe & Réquillart Vincent, 2004. "Economics of Private Labels: A Survey of Literature," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 2(1), pages 1-25, February.
    9. Avi Goldfarb & Qiang Lu & Sridhar Moorthy, 2009. "Measuring Brand Value in an Equilibrium Framework," Marketing Science, INFORMS, vol. 28(1), pages 69-86, 01-02.
    10. Reimer Jeffrey J, 2004. "Market Conduct in the U.S. Ready-to-Eat Cereal Industry," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 2(1), pages 1-29, November.
    11. Mojduszka, Eliza M., 2001. "Integration Of A Product Choice Model And A Latent Variable Model Of Nutrition Information," 2001 Annual meeting, August 5-8, Chicago, IL 20678, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Cotterill, Ronald, 1998. "Jawboning Cereal: The Campaign to Lower Cereal Prices," Issue Papers 161559, University of Connecticut, Food Marketing Policy Center.
    13. Richards, Timothy J. & Patterson, Paul M., 2006. "Firm-Level Competition in Price and Variety," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(3), pages 1-22, December.
    14. Herrmann, Roland & Moser, Anke & Werner, Elke, 2002. "Neue empirische Befunde zur Preissetzung und zum Verbraucherverhalten im Lebensmitteleinzelhandel," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 51(02), pages 1-13.
    15. Cotterill, Ronald & Franklin, Andrew, 1998. "An Estimation of Consumer Benefits From the Public Campaign To Lower Cereal Prices," Issue Papers 161560, University of Connecticut, Food Marketing Policy Center.
    16. Gray, Thomas W., 2009. "Selecting a Cooperative Membership Structure for the Agriculture-of-the- Middle Initiative," Research Reports 280104, United States Department of Agriculture, Rural Development.
    17. Connor, John M., 1997. "Couponing As A Horizontal And Vertical Strategy: Theory And Effects," Working Papers 14344, University of Minnesota, The Food Industry Center.

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