Comparing competitive toughness to benchmark outcomes in retail oligopoly pricing. Issue 1 (3rd December 2017)

• Record Type: Journal Article
• Authors: Sakamoto, Ryo; Stiegert, Kyle
• Other Names: Bonanno Alessandro guestEditor.; Russo Carlo guestEditor.; Perito Maria Angela guestEditor.; Menapace Luisa guestEditor.
• Is Part Of: Agribusiness. Volume 34:Issue 1(2018)
• Page Start: 44
• Page End: 60
• Publication Date: 2017-12-03
• Subjects: Agriculture -- Economic aspects -- Periodicals; Agriculture -- Finance -- Periodicals; Agricultural industries -- Periodicals; Agriculture -- Economic aspects -- United States -- Periodicals; Agriculture -- United States -- Finance -- Periodicals; Agricultural industries -- United States -- Periodicals; 338.1
• DOI: 10.1002/agr.21537
• Languages: English
• ISSNs: 0742-4477

Abstract

Abstract: Past research on pricing in imperfectly competitive markets conventionally assumes that competition operates through a specific quantity or a price game. However, most markets do not function in a manner consistent with a single static benchmark. Methods to overcome this problem have largely been rejected by the research community (i.e., conjectural variations). The primary objective of our research is to introduce a new methodology for measuring imperfect competition under product differentiation in consumer goods. We develop the empirical procedures for estimating a competitive toughness model as proposed by d'Aspremont, Dos Santos Ferreira, and Gérard‐Varet. This approach presents a theoretically grounded procedure that measures market power in an empirically tractable framework. We estimate the proposed model on the retail market for ground coffee. Our results suggest that market power is understated in a model that imposes the restriction of Bertrand pricing. The results suggest that this could be a promising approach for use in many applications. [EconLit citations: D43, L13, K21]