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Brand-Supermarket Demand for Breakfast Cereals and Retail Competition

Posted: 26 Jul 2007  

Benaissa Chidmi

Texas Tech University - Department of Agricultural and Applied Economics

Rigoberto A. Lopez

University of Connecticut - College of Agricultural, Health and Natural Resources

Abstract

The Berry, Levinsohn, and Pakes (1995) market equilibrium model is extended to the supermarket chain level to examine consumer choices and retail competition for thirty-seven brands of breakfast cereals in Boston. Estimated taste parameters for product characteristics vary significantly across consumers. Although consumers are price-sensitive with respect to their chosen cereals, they exhibit strong brand and supermarket loyalty. Retail markups increase and marginal costs decrease with grocery market shares, attesting to oligopoly power with efficiencies. Markups decrease with the own-price elasticity of demand, with Corn Flakes having the highest markups. A detailed picture of consumer response and supermarket competition is provided.

Suggested Citation

Chidmi, Benaissa and Lopez, Rigoberto A., Brand-Supermarket Demand for Breakfast Cereals and Retail Competition. American Journal of Agricultural Economics, Vol. 89, No. 2, pp. 324-337, May 2007. Available at SSRN: https://ssrn.com/abstract=1002749 or http://dx.doi.org/10.1111/j.1467-8276.2007.00994.x

Benaissa Chidmi (Contact Author)

Texas Tech University - Department of Agricultural and Applied Economics ( email )

Box 42132
Lubbock, TX 79409-2132
United States

Rigoberto A. Lopez

University of Connecticut - College of Agricultural, Health and Natural Resources ( email )

1376 Storrs Road, Unit 4066
Storrs, CT 06269-4021
United States
(860) 486-1921 (Phone)

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