Price Transmission in Differentiated Product Market Channels: A Study of the Boston Fluid Milk Market and the North East Dairy Compact

Tirtha Dhar (tdhar@uoguelph.ca) and Ronald Cotterill (ron@cotterilleconomics.com)

No 67, Food Marketing Policy Center Research Reports from University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy

Abstract: This study develops a two-stage market channel model to analyze pricing in the Boston milk market where retailers are differentiated sellers. A nonlinear model of demand and costs, including firm specific and industry cost shift variables is estimated for each of the four leading supermarkets. Cost pass through rates for industry wide shifts are near 100%; for firm specific costs they range between 32 and 47 percent, suggesting that substantial differentiation and related market power. A test for focal point collusion finds that channel firms elevated retail prices when the Northeast Dairy Compact elevated and stabilized raw milk prices.

Keywords: price transmission; industry versus firm specific cost inputs; differentiated product oligopoly; focal point collusion; Demand and Price Analysis; Industrial Organization (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (6)

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Working Paper: Price Transmission in Differentiated Product Market Channels: A Study of the Boston Fluid Milk Market and the North East Dairy Compact (2002)
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