Estimation of the Effects of New Brands on Incumbents’ Profits and Consumer Welfare: The U.S. Processed Cheese Market Case

Estimation of the Effects of New Brands on Incumbents’ Profits and Consumer Welfare: The U.S.... I estimate the effects of new brands on market competition and consumer welfare in the U.S. processed cheese market. I find that an observed increase in consumer welfare was attributable mainly to an increase in the number of brands in the sample market, while the price effect, which measures welfare change caused by adding new brands to existing brands, decreased welfare as the prices of the existing brands increased in a large portion of sample markets. The price increase was most pronounced among the introducer’s existing brands. I also find that the data used in the paper identify a significant enhancement of consumer welfare as a result of the change in product characteristics provided by new brands even if a large portion of welfare gain is explained by the assumption on the error term in the utility function. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Estimation of the Effects of New Brands on Incumbents’ Profits and Consumer Welfare: The U.S. Processed Cheese Market Case

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2004 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-004-3172-6
Publisher site
See Article on Publisher Site

Abstract

I estimate the effects of new brands on market competition and consumer welfare in the U.S. processed cheese market. I find that an observed increase in consumer welfare was attributable mainly to an increase in the number of brands in the sample market, while the price effect, which measures welfare change caused by adding new brands to existing brands, decreased welfare as the prices of the existing brands increased in a large portion of sample markets. The price increase was most pronounced among the introducer’s existing brands. I also find that the data used in the paper identify a significant enhancement of consumer welfare as a result of the change in product characteristics provided by new brands even if a large portion of welfare gain is explained by the assumption on the error term in the utility function.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Sep 13, 2004

References

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