COST PASS-THROUGH IN DIFFERENTIATED PRODUCT MARKETS: THE CASE OF U.S. PROCESSED CHEESE -super-*

Donghun Kim and Ronald W. Cotterill

Journal of Industrial Economics, 2008, vol. 56, issue 1, pages 32-48

Abstract: In this paper, we estimate a mixed logit model for demand in the U.S. processed cheese market. The estimates are used to determine pass-through rates of cost changes under different behavioral regimes. We find that, under collusion, the pass-through rates for all brands fall between 21% and 31% while, under Nash-Bertrand price competition, the range of pass-through rates is between 73% and 103%. The mixed logit model provides a more flexible framework for studying pass-through rates than the logit model since the curvature of the demand functions depends upon the empirical distribution of consumer types. Copyright 2008 The Authors.

Date: 2008

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