Product differentiation and cost pass-through

Jens-Peter Loy and Thomas Glauben

No 235400, 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts from Agricultural and Applied Economics Association

Abstract: Many food products show a high level of vertical and horizontal product differentiation. Manufacturers may instrument product differentiation to limit competition and to increase price dispersion. In this paper, we estimate a panel error correction cost pass-through model for the German yoghurt market over a six year period (t = 312) to determine the impact of product differentiation on price competition between individual brands and varieties of yoghurt. We find that more differentiated products show higher markups, reduced equilibrium cost pass-through and lower speed of cost-price adjustments. The results indicate that manufacturers (and/or retailers) use product differentiation to limit price competition.

Keywords: Agribusiness; Demand and Price Analysis; Industrial Organization (search for similar items in EconPapers)
Date: 2016-07-31
New Economics Papers: this item is included in nep-agr, nep-com and nep-ind
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea16:235400

DOI: 10.22004/ag.econ.235400

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