A structural model of the analysis of retail market power: The case of fluid milk

Vardges Hovhannisyan, Brian W. Gould

Research output: Contribution to journalArticlepeer-review

19 Scopus citations

Abstract

We derive a structural model of firm behavior that is composed of the Generalized Quadratic Almost Ideal Demand System to represent both consumers' milk preferences and firm profit maximization conditions that allow for a range of competitive scenarios. The importance of this specification is found in its fuller representation of consumer preferences, as opposed to the Linear Approximate Almost Ideal Demand System used in previous analyses. We apply this structural framework to investigate retailer conduct in the sale of beverage milk in a U.S. market using product-level data. Our Lerner Index estimates show that retailers are not perfectly competitive. However, this deviation is small.

Original languageEnglish (US)
Pages (from-to)67-79
Number of pages13
JournalAmerican Journal of Agricultural Economics
Volume94
Issue number1
DOIs
StatePublished - Jan 1 2012

Keywords

  • Conjectural variation
  • GQAIDS demand
  • market power
  • national vs. private label brands
  • structural model

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