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Bread Markets: A Systems Analysis of Interfirm Behavior

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  • Moriak, Theodore F.
  • Logan, Samuel H.

Abstract

Excerpts from the report Summary: This study developed a model of a bakery market to appraise the relative efficiencies of alternative methods of distributing bread. Particular emphasis was placed on simplicity in formulation, possibility of estimating parameters from available data, and keeping future data gathering costs low. The model was validated against behavior of wholesale bakers in 1960 and 1964. Analysis of three experiments shows the model to be a useful tool for measuring and appraising the relative efficiencies of alternative distribution systems and pricing policies. Market demand elasticities for bread were estimated from government and industry data. The estimated price elasticity was -0.372, and the income elasticity was +0.086. This means that a 10 percent increase in bread prices would cause a 3.7 percent decrease in per capita demand. A 10 percent increase in per capita disposable income would cause only a 0.9 percent increase in per capita demand. This model could be used to determine quantitative answers to important questions. What percentage of output might be wrapped as private label? What percentage of output might be distributed as drop stop or as dock pickup? What might happen to per unit profits if bakers more freely switched labels and distribution outlets? The answers to these questions could aid negotiation of contracts between labor unions and bakers as well as between bakers and chain stores.

Suggested Citation

  • Moriak, Theodore F. & Logan, Samuel H., 1977. "Bread Markets: A Systems Analysis of Interfirm Behavior," Miscellaneous Publications 337407, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersmp:337407
    DOI: 10.22004/ag.econ.337407
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    File URL: https://ageconsearch.umn.edu/record/337407/files/AGERS-26.pdf
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    References listed on IDEAS

    as
    1. Moriak, Theo F. & Logan, Samuel H., 1971. "Monthly Retail Demand for Bread," Journal of Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, vol. 23(3), pages 1-5, July.
    2. Meinken, Kenneth W., 1955. "The Demand and Price Structure for Wheat," Technical Bulletins 157127, United States Department of Agriculture, Economic Research Service.
    3. Oliver E. Williamson, 1965. "A Dynamic Theory of Interfirm Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 79(4), pages 579-607.
    4. George, P.S. & King, Gordon A., 1971. "Consumer Demand for Food Commodities in the United States with Projections for 1980," Monographs, University of California, Davis, Giannini Foundation, number 11936, December.
    5. Richard G. Walsh & Bert M. Evans & Eleanor M. Birch, 1964. "Some Consequences of Bilateral Oligopoly and Vertical Integration in Bread Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 46(1), pages 161-172.
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