Retail Prices for Milk by Fat Content: A New Theory and Empirical Test of Retailer Pricing Behavior

Retail Prices for Milk by Fat Content: A New Theory and Empirical Test of Retailer Pricing Behavior

Blog Article

We study a heretofore sequal eclipse 5 battery unexamined type of product differentiation, horizontally differentiated products with differential costs, and apply the analysis to retail pricing of fluid milk products.The theoretical models yield unique predictions for the relationship among prices of the four horizontally differentiated fluid milk products (skim, 1%, 2%, 6-0 igora vibrance and whole milk) and the impacts of butterfat and nonfat milk costs on prices, depending upon the form of retail competition.An empirical analysis of retail milk pricing for four major cities in California enables tests to be conducted of which form of behavior best characterizes grocery retailing in these cities.