Rivalry in price and location by differentiated product manufacturers

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

Research output: Contribution to journalArticle

5 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 languageEnglish (US)
Pages (from-to)650-668
Number of pages19
JournalAmerican Journal of Agricultural Economics
Volume95
Issue number3
DOIs
StatePublished - Apr 1 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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