Measuring Market Power in the Ready-To-Eat Cereal Industry
| dc.creator | Nevo, Aviv | |
| dc.date | 2017-04-01T18:17:03Z | |
| dc.date.accessioned | 2026-07-09T03:49:52Z | |
| dc.description | The ready-to-eat cereal industry is characterized by high concentration, high price-cost margins, large advertising to sales ratios, and numerous introductions of new products. Previous researchers have concluded that the ready-to-eat cereal industry is a classic example of an industry with nearly collusive pricing behavior and intense non-price competition. This paper empirically examines this conclusion. In particular, I estimate price-cost margins, but more importantly I am able empirically to separate these margins into three parts: (1) that which is due to product differentiation; (2) that which is due to multi-product firm pricing; and (3) that due to potential price collusion. The results suggest that given the demand for different brands of cereal, the first two effects explain most of the observed price-cost markups. I conclude that prices in the industry are consistent with non-collusive pricing behavior, despite the high price-cost margins. Leading firms are able to maintain a portfolio of differentiated products, and influence the perceived quality of these products, and it is these two factors that lead to high price-cost margins. | |
| dc.identifier | doi:10.22004/ag.econ.25164 | |
| dc.identifier | https://ageconsearch.umn.edu/record/25164/files/rr980037.pdf | |
| dc.identifier | http://ageconsearch.umn.edu/record/25164 | |
| dc.identifier.uri | http://hdl.handle.net/123456789/540578 | |
| dc.language | eng | |
| dc.publisher | ||
| dc.source | http://ageconsearch.umn.edu/record/25164 | |
| dc.title | Measuring Market Power in the Ready-To-Eat Cereal Industry | |
| dc.type | Text |