Estimating Market Power and Pricing Conduct in a Product-Differentiated Oligopoly: The Case of the Domestic Spaghetti Sauce Industry

Vickner, Steven S.; Davies, Stephen

doi:10.1017/s0081305200028739

Cited by 22 publications

(5 citation statements)

References 24 publications

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“…First, all firms within the single geographic market seek to differentiate the new (organic) product from the conventional product. The firms make this effort because product-differentiated oligopolies can benefit greatly by creating market power (Mazzeo, 2002;Vickner and Davies, 1999) and quality is a good basis for achieving differentiation (Giraud-Heraud et al, 1999). In other words, the firms strive to convince consumers that the new organic product is a higher-quality item so as to justify the organic price premium over the conventional product.…”

Section: B Oligopoly Stagementioning

confidence: 99%

“…Previous empirical results show that this market structure influences the competitive behavior of firms. For example, Vickner and Davies (1999) found a higher degree of price collusion among brands within a market segment than between segments for conventional spaghetti. This implies that the differentiation efforts of organic firms are more often aimed at separating themselves from the conventional market rather than from each other.…”

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confidence: 99%

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Can/Should/Will A Niche Become the Norm? Organic Agriculture's Short Past and Long Future

Blank¹,

Thompson²

2004

Contemporary Economic Policy

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A theory is proposed that explains the evolution of a market based on a quality variant as it goes from being a niche to the market norm. Organic commodities are described as such a quality variant and used to focus on the economic and policy issues that arise during a market's evolution. It is shown how organic products in general can become the norm in many American commodity markets. However, there is disagreement over whether it should and much uncertainty about whether it will. The current status of two organic markets is discussed to illustrate empirical issues. (JEL Q130, Q110, Q100)

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Section: B Oligopoly Stagementioning

confidence: 99%

mentioning

confidence: 99%

Can/Should/Will A Niche Become the Norm? Organic Agriculture's Short Past and Long Future

Blank¹,

Thompson²

2004

Contemporary Economic Policy

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“…No support is found for Bertrand or Stackelberg type of competition. Vickner & Davies (1999) makes an empirical investigation about the market power and the pricing conduct in a representative product differentiated oligopoly: the spaghetti sauce market. It makes use of panel data to understand the price conduct and market power of firms.…”

Section: Literaturementioning

confidence: 99%

Follow the Leaders: competition in the Brazilian Auto Financing Sector

Moita

Silva

2014

Estud. Econ.

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This study seeks to understand the competitive pattern and strategy of the firms in the Brazilian automobile financing market. First, we analyzed the strong segmentation observed in this market, determining market niches. We then estimated reaction functions to price changes. The results indicated that the three largest companies in the sector have a strong influence on interest rate setting within the entire segment. This phenomenon characterizes the competition of this sector as the leader-follower type, rather than Bertrand competition, the latter of which is often expected in the banking sector and it demonstrates the existence of the leading firms' market power. Keywordsreaction functions, auto financing, leader-follower game, market power ResumoEste estudo busca compreender o padrão competitivo e estratégia das empresas no mercado de financiamento de automóveis brasileiro. Primeiramente, analisamos a forte segmentação observada neste mercado, determinando nichos de mercado. Em seguida, estimamos funções de reação às mudanças de preços dos concorrentes. Os resultados indicam que as três maiores empresas do setor têm uma forte influência sobre a definição da taxa de juros dentro de todo o segmento. Esse fenômeno caracteriza a competição do setor como do tipo líder-seguidor, ao invés de competição a la Bertrand, o último dos quais é frequentemente esperado no setor bancário e demonstra a existência de poder de mercado das empresas líderes. Palavras-Chavefunções de reação, financiamento de automóveis, competição líder-seguidor, poder de mercado JEL Classification

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“…Several researchers have attempted to quantify the nature of strategic response in a product-differentiated oligopoly utilizing food and beverage industries as the focus of their studies (Baker & Bresnahan, 1985;Cotterill, 1994;Haller & Cotterill, 1995;Liang, 1989;Vickner & Davies, 1999). Employing the New Empirical Industrial Organization paradigm, price was treated as an endogenous variable, often using Bertrand price reaction functions to model strategic response.…”

Section: Literature Reviewmentioning

confidence: 99%

Estimating strategic price response in a product-differentiated oligopoly: The case of a domestic canned fruit industry

Vickner,

Davies

2000

Agribusiness

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In this article, we empirically estimate the strategic price response in a domestic canned fruit industry using national-level, weekly point-of-purchase scanner data. Augmented Dickey-Fuller tests are used to obtain univariate time series properties of Del Monte and Dole's canned pineapple prices. Johansen's likelihood ratio cointegration test is used to characterize the existence of an industry pricing equilibrium. Vector autoregression and vector error correction models are employed to examine the multivariate time series properties of the two firms' prices. Granger causality tests are used to address the price leadership hypothesis, while impulse response functions are constructed to chronicle the intertemporal price response to an innovation in a rival's price series. The battery of tests indicates that Del Monte follows Dole's pricing decisions in this narrowly defined product market. A thorough understanding of empirical price reactions has far-reaching strategic management implications, such as forecasting a rival's response and avoiding costly price wars. [L110, L200, L660]

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Estimating Market Power and Pricing Conduct in a Product-Differentiated Oligopoly: The Case of the Domestic Spaghetti Sauce Industry

Cited by 22 publications

References 24 publications

Can/Should/Will A Niche Become the Norm? Organic Agriculture's Short Past and Long Future

Can/Should/Will A Niche Become the Norm? Organic Agriculture's Short Past and Long Future

Follow the Leaders: competition in the Brazilian Auto Financing Sector

Estimating strategic price response in a product-differentiated oligopoly: The case of a domestic canned fruit industry

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