Rivalry in price and location by differentiated product manufacturers

Timothy Richards; William J. Allender; Stephen F. Hamilton

doi:10.1093/ajae/aas137

Rivalry in price and location by differentiated product manufacturers

Timothy Richards, William J. Allender, Stephen F. Hamilton

Research output: Contribution to journal › Article › peer-review

7 Scopus citations

Abstract

In this article, we estimate a model of strategic rivalry between food manufacturers in product design and pricing.We derive a spatial structural model in which food manufacturers jointly select prices and the optimal attribute composition of their product lines.We find that manufacturers have an incentive to locate yogurt products nearby others in attribute space and that products with the most similar attribute compositions enjoy the widest price-cost margins. Our findings explain the observation that most consumer package goods tend to be very similar, yet manufacturers appear to earn above-normal profits.

Original language	English (US)
Pages (from-to)	650-668
Number of pages	19
Journal	American Journal of Agricultural Economics
Volume	95
Issue number	3
DOIs	https://doi.org/10.1093/ajae/aas137
State	Published - Apr 2013

Keywords

Differentiated products
Discrete choice
Distance metric
Pricing
Product design
Yogurt

ASJC Scopus subject areas

Agricultural and Biological Sciences (miscellaneous)
Economics and Econometrics

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10.1093/ajae/aas137

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title = "Rivalry in price and location by differentiated product manufacturers",

abstract = "In this article, we estimate a model of strategic rivalry between food manufacturers in product design and pricing.We derive a spatial structural model in which food manufacturers jointly select prices and the optimal attribute composition of their product lines.We find that manufacturers have an incentive to locate yogurt products nearby others in attribute space and that products with the most similar attribute compositions enjoy the widest price-cost margins. Our findings explain the observation that most consumer package goods tend to be very similar, yet manufacturers appear to earn above-normal profits.",

keywords = "Differentiated products, Discrete choice, Distance metric, Pricing, Product design, Yogurt",

author = "Timothy Richards and Allender, {William J.} and Hamilton, {Stephen F.}",

note = "Funding Information: Support from AFRI-NIFA (USDA) grant no. 2009-04140 is gratefully acknowledged.",

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AU - Allender, William J.

AU - Hamilton, Stephen F.

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PY - 2013/4

Y1 - 2013/4

N2 - In this article, we estimate a model of strategic rivalry between food manufacturers in product design and pricing.We derive a spatial structural model in which food manufacturers jointly select prices and the optimal attribute composition of their product lines.We find that manufacturers have an incentive to locate yogurt products nearby others in attribute space and that products with the most similar attribute compositions enjoy the widest price-cost margins. Our findings explain the observation that most consumer package goods tend to be very similar, yet manufacturers appear to earn above-normal profits.

AB - In this article, we estimate a model of strategic rivalry between food manufacturers in product design and pricing.We derive a spatial structural model in which food manufacturers jointly select prices and the optimal attribute composition of their product lines.We find that manufacturers have an incentive to locate yogurt products nearby others in attribute space and that products with the most similar attribute compositions enjoy the widest price-cost margins. Our findings explain the observation that most consumer package goods tend to be very similar, yet manufacturers appear to earn above-normal profits.

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KW - Discrete choice

KW - Distance metric

KW - Pricing

KW - Product design

KW - Yogurt

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Rivalry in price and location by differentiated product manufacturers

Abstract

Keywords

ASJC Scopus subject areas

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