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This article investigates the competition effects of supermarket food and non-food services using fluid milk as a case study. A simultaneous equation model for services and price competition is estimated with scanner data from 16 supermarket chains operating in six U.S. cities. Empirical results show that a greater scope of services results in higher retail cost, greater supermarket chain-level demand but lower price elasticity, and enhanced market power, all leading to higher milk prices and quantity of milk sold. However, unlike previous research, we conclude that increases in cost rather than market power explain most of the ensuing price increases.

Keywords: retailing ; service ; pricing ; milk ; market power ; competition

Subject(s): Demand and Price Analysis


Issue Date: 2007-11

Publication Type: Report

PURL Identifier:

Total Pages: 35

JEL Codes: L81; D40; L66

Series Statement: Research Report


Record appears in: University of Connecticut > Food Marketing Policy Center > Research Reports

Autor: Bonanno, Alessandro ; Lopez, Rigoberto


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