Measuring Market Power in the Ready-to-Eat Cereal Industry

Posted: 11 Jul 2000

See all articles by Aviv Nevo

Aviv Nevo

Northwestern University - Department of Economics; National Bureau of Economic Research (NBER)

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Abstract

This paper examines the view that the ready-to-eat cereal industry is a classic example of an industry with nearly collusive pricing behavior and intense non-price competition. In particular, I estimate price-cost margins and separate these margins into three sources: (1) that which is due to product differentiation; (2) that which is due to multi-product firm pricing; and (3) that due to potential price collusion. The results suggest that the first two effects explain most of the observed price-cost margins. I conclude that prices in the industry are consistent with non-collusive pricing behavior, despite the high price-cost margins.

JEL Classification: L13

Suggested Citation

Nevo, Aviv, Measuring Market Power in the Ready-to-Eat Cereal Industry. Econometrica, Available at SSRN: https://ssrn.com/abstract=229527

Aviv Nevo (Contact Author)

Northwestern University - Department of Economics ( email )

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United States

National Bureau of Economic Research (NBER)

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