Strategic Pricing Behavior Under Asset Value Maximization

Shinn-Shyr Wang, Kyle Stiegert () and Tirtha P. Dhar

No 201531, Working Papers from University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group

Abstract: This article 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 profit maximization model is rejected in favor of the MVM structure, which indicates that financial market uncertainty plays an important role in the pricing behavior of this industry. We estimate the price elasticities of demand for leading brands and investigate the degree of market power in this industry.

Keywords: Food Consumption/Nutrition/Food Safety; Research and Development/Tech Change/Emerging Technologies; Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 35
Date: 2006-02
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https://ageconsearch.umn.edu/record/201531/files/WP2006-02.pdf (application/pdf)

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 (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwfswp:201531

DOI: 10.22004/ag.econ.201531

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