Strategic Pricing Behavior under Asset Value Maximization

Shinn-Shyr Wang, Kyle Stiegert (kwstiegert@wisc.edu) and Tirtha Dhar (tdhar@uoguelph.ca)

No 19198, 2005 Annual meeting, July 24-27, Providence, RI from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: This paper investigates a comprehensive assessment of firm strategic behavior under financial market uncertainty. A general theoretical model of market value maximization (MVM) is constructed using a traditional capital asset pricing format. The model built on the nonlinear Almost Ideal Demand Systems (AIDS) and structural first-order conditions is developed. By full information maximum likelihood (FIML) estimation, the model evaluates pricing strategies in the U.S. margarine and butter retail markets using 4-week interval scanner data from 1998 to 2002. The model of profit maximization is rejected in favor of the MVM structure, and it indicates that financial market uncertainty plays an important role in the pricing behavior in this industry. We estimate the price elasticities of demand for leading brands and investigate the degree of market power in this industry.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Pages: 50
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Strategic Pricing Behavior under Asset Value Maximization (2010)
Working Paper: Strategic Pricing Behavior Under Asset Value Maximization (2006)
Working Paper: Strategic Pricing Behavior under Asset Value Maximization (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea05:19198

DOI: 10.22004/ag.econ.19198

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