Bread Markets: A Systems Analysis of Interfirm Behavior

Theodore F. Moriak and Samuel H. Logan

No 337407, Miscellaneous Publications from United States Department of Agriculture, Economic Research Service

Abstract: Excerpts from the report Summary: This study developed a model of a bakery market to appraise the relative efficiencies of alternative methods of distributing bread. Particular emphasis was placed on simplicity in formulation, possibility of estimating parameters from available data, and keeping future data gathering costs low. The model was validated against behavior of wholesale bakers in 1960 and 1964. Analysis of three experiments shows the model to be a useful tool for measuring and appraising the relative efficiencies of alternative distribution systems and pricing policies. Market demand elasticities for bread were estimated from government and industry data. The estimated price elasticity was -0.372, and the income elasticity was +0.086. This means that a 10 percent increase in bread prices would cause a 3.7 percent decrease in per capita demand. A 10 percent increase in per capita disposable income would cause only a 0.9 percent increase in per capita demand. This model could be used to determine quantitative answers to important questions. What percentage of output might be wrapped as private label? What percentage of output might be distributed as drop stop or as dock pickup? What might happen to per unit profits if bakers more freely switched labels and distribution outlets? The answers to these questions could aid negotiation of contracts between labor unions and bakers as well as between bakers and chain stores.

Keywords: Demand and Price Analysis; Institutional and Behavioral Economics; Marketing; Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 116
Date: 1977-02
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uersmp:337407

DOI: 10.22004/ag.econ.337407

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