An Econometric Analysis of Brand Level Strategic Pricing Between Coca Cola and Pepsi Inc.
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Market structure and strategic pricing for leading brands sold by Coca Cola and
Pepsi Inc. are investigated in the context of a flexible demand specification and
structural price equations. This approach is more general than prior studies that
rely upon linear approximations and interactions of an inherently nonlinear
problem. We test for Bertrand equilibrium, Stackelberg equilibrium, collusion,
and a general conjectural variation (CV) specification. This nonlinear Full
Information Maximum Likelihood (FIML) estimation approach provides useful
information on the nature of imperfect competition and the extent of market
power.