Asymmetric Margins in Prices and Retail Supply Chain Integration: The Spanish Vegetable Case

Several studies have observed asymmetric behavior between sale prices in the supermarket and the price paid to the farmer. This article presents the consequences derived from a simplified framework considering a scenario in which the retailer wishes to maintain balanced profits due to external pressures or because the retailers' strategy to differentiate themselves from the competition requires greater integration in the supply chain. It is shown that the price-fixing decision of the distributor may depend on the risk, measured by the relationship between demand elasticity and variable costs, as a result of uncertainty in consumer response to price variations. This risk arises from the existence of supply that is highly changeable in the short term and demand that is unpredictable.     

Do Voluntary Biotechnology Labels Matter to the Consumer? Evidence from the Fluid Milk Market

This article examines the effects on the demand of voluntary labeling for the use of genetically modified growth hormone for retail fluid milk using supermarket scanner data. Retail fluid milk tracks one of the first biotechnology products approved, is fairly standardized and ubiquitous, and allows for cross-sectional differentiation between labeled and unlabeled products and between conventional and organic brands. The results indicate that voluntary labeling increases the demand for recombinant bovine growth hormone free milk. In addition, the estimated effects of labeling appear to have increased over time.     

Milk by Any Other Name … Consumer Benefits from Labeled Milk

This article uses revealed preferences of consumers to study the consumer benefits from rBST-free and organic labeled milk. The article specifies and estimates a quadratic AIDS demand system model for different milk types using U.S. supermarket scanner data. The introduction of rBST-free and organic milk is used to estimate consumer benefits that are decomposed into two components, competitive and variety effects. Results show significant consumer benefits from organic milk and to a lesser extent from rBST-free milk. Based on the findings, we explore implications for present U.S. labeling standards.     

Rivalry in Price and Variety among Supermarket Retailers

Recent theoretical models of retail competition suggest that product heterogeneity is critical to retail price and variety strategies. This article provides empirical evidence on supermarket retailers' price and variety strategies using a nested constant elasticity of substitution (NCES) modeling framework. The model is estimated using chain-level scanner data for four major grocery chains in a large, urban West Coast market. The results show that retailers compete for market share using both price and variety. While they all tend to follow moderately cooperative pricing strategies, the extent to which they follow cooperative strategies in variety is less homogeneous.     

Demand for dairy products in Mexico

Mexico is the world's largest importer of non-fat dry milk (NFDM) and imports of cheese, fluid milk, and whey have increased rapidly in the past four years. In the wake of GATT and the NAFTA, as well as recent economic developments in Mexico, world dairy markets will be affected as a result of changes in the Mexican dairy sector. The study analyzes both domestic and import demand for dairy products in Mexico to determine price and income elasticities as well as import elasticities. The results indicate that the demand for fluid milk is the most responsive to price changes and NFDM demand is inelastic with respect to its own price. There is little subtitution between fluid milk and non-fat dry milk, although fluid milk is relatively elastic, which suggests the existence of other substitutes for fluid milk. Estimation of import demand equations reveal similar trends in response to price changes, but income elasticity of imports was highest for fluid milk which suggests that Mexico will import possibly more fluid than dry milk as incomes rise. The exchange rate was the most significant variable influencing all dairy product imports.     

Healthy Competition to Support Healthy Eating? An Investigation of Fruit and Vegetable Pricing in UK Supermarkets

Governments and public health officials are urging the public to eat more fruits and vegetables to contribute to a healthy diet. However, there is concern that a lack of effective competition amongst supermarket retailers has resulted in inflated prices for these products which are deterring consumers from eating more of these healthy foods. We investigate this by examining the nature and extent of price competition for fresh fruits and vegetables amongst UK supermarket retailers, drawing on a panel of weekly retail and corresponding wholesale market prices over a seven‐year period. We find that the extent of supermarket competition varies across the products, being quite intense on some but much weaker on others, where the retailers do not fully respond to each other's prices and where the extent of their competitive interaction varies significantly with each other.     

Product Labeling and Economic Value of Milk Market Segmentation

Abstract

This study explores the economic benefit from labeling milk and milk products and its impact on the supply and demand for fluid milk. The empirical estimate measures the economic value of milk market segmentation based on consumers' willingness to pay for hormonefree milk. The study uses survey data from Kansas households and applied a Probit model for willingness-to-pay and an ordinary least square model for demand analysis. The empirical results show that as long as consumers are willing to pay a higher price for bSTfree milk society would benefit from milk market segmentation.     

Supermarket Promotions and Food Prices: A Note

Using a sample comprising nearly 250,000 weekly prices from the largest seven UK supermarket chains, this note investigates two pricing practices that have attracted public interest: the tendency for promotions to ‘disguise’ rises in non‐sale prices and the inflation of prices prior to sales which ‘exaggerate’ the discount. Analysing price dynamics before and after periods of promotional discounting results show post‐sale prices are typically lower than pre‐sale prices, contrary to the disguise hypothesis. We do, however, find evidence of exaggeration of the discount, which may potentially explain why prices fall after discounts, although the evidence is not sufficiently widespread for this to be the sole cause. Results parallel the competition authority's view of supermarket promotions and point to the useful contribution that retail price microdata might play in keeping prices in check in countries where highly concentrated retail sectors raise similar concerns.     

Demand for milk quantity and safety in urban China: evidence from Beijing and Harbin

Urban households account for most of the milk consumption in China, but their consumption is hampered by safety concerns. Using survey data collected in Beijing and Harbin in 2010, this paper simultaneously analyses urban households' milk consumption using a multiple linear model and their willingness‐to‐pay for milk safety using an ordered choice model. The results of this study show that as income increases, urban households consume more milk and are willing to pay a higher premium for milk safety. Modern food marketing channels play a positive role in stimulating milk consumption and building consumers' confidence in milk safety. The growth in the elderly population influences milk consumption positively, but their demand for milk safety is negatively affected by higher price. The combined analysis of households' demand for milk quantity and safety may be useful to the Chinese government in promoting the development of the domestic milk industry and to dairy firms in exploring the milk market in China.     

Demand for wild edible mushrooms. The case of Lactarius deliciosus in Barcelona (Spain)

Wild edible mushroom demand has increased substantially in OECD countries in the last few years. Nevertheless, few studies have been published in recent years on these markets. The main objective of this paper is to characterise the saffron milk cap (Lactarius deliciosus Fr.) demand in Spain. Data sources in this study come from main Central Markets in Spain. Using econometric methods, we have found that the consequence of an increase in the price of the saffron milk cap has a negative effect on demand. However, changes in the percentage of persons born in Catalonia every year exercise a positive effect, and price increases in the Madrid market could also induce an increase in the Lactarius deliciosus demand in the Barcelona Central Market. The consequences of chanterelle imports on the Catalan demand for the saffron milk cap appear to be negative. Finally, results indicate that the saffron milk cap and oyster mushroom behave as complementary goods and, therefore, consumption of one of these mushrooms reinforces the other's consumption.     

Brand-Supermarket Demand for Breakfast Cereals and Retail Competition

The Berry, Levinsohn, and Pakes (1995) market equilibrium model is extended to the supermarket chain level to examine consumer choices and retail competition for thirty-seven brands of breakfast cereals in Boston. Estimated taste parameters for product characteristics vary significantly across consumers. Although consumers are price-sensitive with respect to their chosen cereals, they exhibit strong brand and supermarket loyalty. Retail markups increase and marginal costs decrease with grocery market shares, attesting to oligopoly power with efficiencies. Markups decrease with the own-price elasticity of demand, with Corn Flakes having the highest markups. A detailed picture of consumer response and supermarket competition is provided.     

A cross-section analysis of household demand for food and nutrients in Tanzania

Undernutrition and malnutrition are still problems of unacceptable proportions in many developing countries. However, the debate on the roles of income and other socio-economic variables such as women’s education and household size on food and nutrient demand continues. This study examines the demand for food and nutrients amongst households in Tanzania, using recent survey data. A quadratic almost ideal demand system (QUAIDS) is employed to estimate price and expenditure elasticities, as well as the impact of socio-economic variables on food demand patterns. A moment-based instrumental variable approach is then used to analyse the determinants of nutrient demand. The results show that income and other socio-economic variables exert significant effects on the demand for food and nutrients. The estimated expenditure elasticities for the nutrients range from 0.307 for iron to 1.26 for Vitamin B₁₂. The elasticities are higher for those micronutrients that are consumed through animal products and lower for those micronutrients that are mainly obtained through staple foods. These results reflect the higher expenditure elasticities for meat, fish, eggs, milk, and milk products, as well as fruits and vegetables, relative to cereals and pulses, reinforcing the assertion that the demand for Vitamins A and B₁₂, as well as calcium and zinc will increase with rising income.     

Demand,challenges, and marketing strategies in the retail promotion of local brand milk

This article addresses the demand and challenges for local brand milk and focuses on the marketing strategies for retail promotion. While federal and state government make efforts to promote local food purchases and consumption at the farm level, local foods face significant distribution challenges in grocers, especially in larger retail stores. Limited shelf space and high pricing by retailers impedes consumers’ purchases and results in weak competitiveness for local brands. Therefore, it is essential for local producers and “buy local” programs to understand what types of promotion and marketing strategies might be more effective in stimulating demand in retail outlets. Using 2010-2011 Nielsen Retail Scanner data in the Northeast region, we estimate a random-coefficient discrete choice model of demand to determine the effects of nutritional characteristics, price, packaging, and distribution strategies on the consumers’ choice to purchase locally branded milk. Results show that local brand milk faces significant demand challenges in addition to high prices and limited outlets in competing with lower-priced products. Marketing strategies, such as price cut, one-gallon package offering, and expanded presence in retail stores, can significantly stimulate the demand for locally branded milk, with one-gallon package offering being the most effective strategy.     

THE DEMAND FOR MILK IN AUSTRALIA ESTIMATION OF PRICE AND INCOME EFFECTS FROM THE 1984 HOUSEHOLD EXPENDITURE SURVEY*

Cross-sectional data are used to estimate a three-equation generalised addilog demand system (GADS); two equations are used to express the demand for milk by method of sale and a residual equation is used to close the system. It is shown that, as the average budget share of the residual equation approaches unity, the GADS equations for the incomplete system are approximately equivalent to double logarithmic equations. It is found that aggregate milk demand is relatively insensitive to both price and income, but the degree of substitution between delivered and non-delivered milk is both large and highly significant. A new test for influential data in the system context is developed and it suggests that the reported results are robust to variations in the sample space.     

A Price Analysis of U.S. Agricultural Exports in East Asian Markets

This paper examines the price competition between U.S. agricultural exports and that of its competitors in East Asia. The results show weak price competition in Japan's corn and soybean markets, and no price competition in the wheat market. U.S. cotton exports to Japan face strong price competition. In Hong Kong, U.S. market shares are low, while the demand for its rice, corn, soybeans and cotton is elastic. For South Korea and Taiwan, improved political relationships between China, South Korea, and Taiwan have caused the U.S. to lose market shares to China.     

The Simple Analytics of Transferable Production Quota: Implications for the Marginal Cost of Ontario Milk Production

Using a competitive dynamic optimization model, the difference between unused and used industrial milk quota values is shown to give an exact measure of the annual rental rate of production quota. Knowledge of the rental rate of production quota and output price can be used to impute the marginal cost of industrial milk production. However, if there is a transfer tax on production quota sales, the imputation of the equilibrium rental value of quota depends on the elasticity of demand and supply for quota as well as the level of the transfer assessment. The marginal cost of Ontario milk production is estimated for each year from 1980–81 to 1994–95, based on unused and used quota values. However, the imputed marginal cost estimates are not totally satisfactory. The results suggest that caution should be exercised in using the difference between unused and used quota prices as a measure of the rental rate of industrial milk production quota.     

Antitrust analysis of supermarkets: global concerns playing out in local markets

This paper reviews the basic components of antitrust analysis for the supermarket industry, including definition of product and geographic markets and the measurement of market power. The analysis of prices and profits in a market structure context remains important, especially in countries such as Australia with very high supermarket concentration. Firm and brand level New Empirical Industrial Organisation models of demand and oligopoly pricing also provide insights for evaluating antitrust claims. Recent research on vertical pricing games and price transmission expand the analysis to market channel pricing issues, including coalescing power by supermarkets and food manufacturers. The issues and approaches explained in this paper are relevant for policy-orientated research on supermarkets worldwide, including Australia.     

INTERACTIONS OF QUANTITY,PRICE AND POLICY: MILK AND DAIRY PRODUCTS

A combination of reasoning and simple regression equations are used to examine the recent history of some aspects of the dairy industry. Attention is dawn to some of the pitfalls in attempting to quantify dairy demand and supply relationships. Elasticities are generally confirmed to be low, with the exception of the demand for cream; though it is suggested that the supply of milk may be less unresponsive to price change than is often maintained. The results obtained are related to milk marketing policy.     

Retail Price Fixity as a Facilitating Mechanism

Previous theoretical explanations for retail price fixity show that fixed retail prices can be consistent with either competitive or imperfectly competitive behavior. We develop a conceptual model of retail pricing wherein fixed price points are facilitating mechanisms for tacit collusion. A non-cooperative equilibrium in fixed retail prices is supported through credible threats to revert to Nash pricing if cheating is suspected. We test the implications of this model using a two-stage, ordered probit approach in weekly supermarket pricing data. The results show that price fixity does support collusive equilibria among retailers, but other factors may also explain retail price behavior.     

Market structure and the demand for veterinary services in India

The livestock sector is emerging as one of the fastest growing agricultural sub‐sectors in India and the expectations are that this growth could further accelerate due to growing incomes and the high income elasticity of demand for livestock products. Given the size and relatively equitable distribution of livestock in India, this presents an excellent opportunity for the country to boost rural incomes and accelerate the pace of poverty reduction. But, successful capitalisation of such opportunities requires a policy regime that facilitates growth in productivity at the farm level as well as in the processing sector. The productive potential of animals depends crucially on the quality of nutrition, genetic material and the animal health system, and on all these counts, India has a poor record. The public sector continues to be the primary provider of veterinary services, and the deteriorating fiscal situation of most state governments is making it extremely difficult to either expand the reach of these services or improve the quality of service delivery. Although, on efficiency grounds, there is good rationale for commercialised delivery of these services, serious concerns prevail in India about the equity implications of private sector delivery or full cost recovery within the government system. Evaluation of the desirability of user fees or private delivery of livestock services requires an understanding of the factors influencing the demand for these services. This paper examines the nature of demand for veterinary services in three states of India and presents first estimates of demand elasticities for veterinary services. The results indicate that price is not an important determinant of the decision to use these services. Also, practically no variation is found in price elasticities across income groups. These results suggest that the fears of sharp declines in the use of these services as a result of full cost recovery and/or private sector delivery are unfounded.