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Firm-Level Competition in Price and Variety

Published online by Cambridge University Press:  28 April 2015

Timothy J. Richards  and
Paul M. Patterson
Timothy J. Richards
Affiliation:
Morrison School of Management and Agribusiness, Arizona State University East, Mesa, AZ
Paul M. Patterson
Affiliation:
Morrison School of Management and Agribusiness, Arizona State University East, Mesa, AZ
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Abstract

Consumer product manufacturers often compete in dynamic, multi-firm oligopolies using multiple strategic tools. While existing empirical models of strategic interaction typically consider only parts of the more general problem, this paper presents a more comprehensive alternative. Marketing decisions are dynamically optimal, consistent with optimal consumer choice, and responsive to rival decisions. Using a single-market case study that consists of five years of four-weekly data on ready-to-eat cereal sales, prices, and new brand introductions, we test several hypotheses regarding the nature of strategic interaction among several rival manufacturers. We find that cereal manufacturers price and introduce new brands cooperatively in the same period, but behave more competitively when dynamic reactions are included.

Keywords

cerealdifferentiated productsdynamicsoligopolyproduct line rivalrystrategic interactionD43L13L66M31Q13
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 38 , Issue 3 , December 2006 , pp. 491 - 512
Copyright
Copyright © Southern Agricultural Economics Association 2006

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