MARKET-STRUCTURE DETERMINANTS OF NATIONAL BRAND-PRIVATE LABEL PRICE DIFFERENCES OF MANUFACTURED FOOD PRODUCTS
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This paper estimates the relationships between market structure and
the Lerner index of monopoly constructed from price data on processed food
products sold through grocery stores. A theoretical model of a differentiated
oligopoly specifies two determinants of price-cost margins: the
Herfindahl-Hirschman index of seller concentration adjusted for the elasticity
of demand and the industry advertising-to-sales ratio. The results
indicate that the three principal determinants of price-cost margin variation,
in order of their impacts, are: advertising intensity, elasticity of
demand, and concentration. Previous structure-performance studies that did
not incorporate the elasticity of demand were probably misspecified.