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This paper presents an analysis of the ready-to-eat breakfast cereal industry based on and related to the current antitrust case involving its leading producers. A spatial competition framework is employed, with brands assumed relatively immobile. It is argued that the industry's conduct, in which price competition is avoided and rivalry focuses on new brand introductions, tends to deter entry and protect profits. Entry into a new segment of the market in the 1970s is discussed. Relevant welfare-theoretic issues are analyzed, and it is argued that the remedy proposed by the FTC is likely to improve performance. This paper reports on analysis performed for and supported since 1972 by the Bureau of Economics of the U.S. Federal Trade Commission. Throughout my association with the FTC, I have profited greatly from working closely with Michael Glassman. I am also indebted to many other past and present Commission staff members, including

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