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

Published online by Cambridge University Press:  28 April 2015

Steven S. Vickner  and
Stephen P. Davies
Steven S. Vickner
Affiliation:
Department of Agricultural Economics, University of Kentucky
Stephen P. Davies
Affiliation:
Department of Agricultural and Resource Economics, Colorado State University
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Abstract

This paper develops a simultaneous-equations panel data econometric model to obtain point estimates of market power and pricing conduct in a representative product-differentiated, oligopolistic food market. The importance of this class of markets is recognized given its prevalence in the food and fiber system, especially for final consumer food products. The $1.3 billion domestic spaghetti sauce industry is featured. Although the results indicate firms exert limited market power, a portion of this power is derived from tacit price collusion. A higher degree of price collusion was found among brands within a market segment than between segments.

Keywords

market poweroligopolypricing conductproduct differentiation
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 31 , Issue 1 , April 1999 , pp. 1 - 13
Copyright
Copyright © Southern Agricultural Economics Association 1999

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