Bruce W. Marion

The Influence of Consumer Price Information on Retail Pricing and Consumer Behavior

Comparative price information for major Ottawa supermarkets was collected over a twenty-eight-week period and published in daily newspapers during a five-week test period. In response to the information, the dispersion of prices across stores and chains narrowed, the average level of prices of the market dropped, and consumer satisfaction increased relative to the control market. Consumers transferred patronage to the lower priced stores. Consumers indicated a willingness to pay 34¢ per week on average for the price comparison information. Estimated consumer benefits far exceeded the cost of the program.

Competition in Grocery Retailing: The Impact of a New Strategic Group on BLS Price Increases

Metropolitan areas with a significant presence of warehouse stores had lower retail food price increases during 1977 to 1992 than did areas with no warehouse stores. The negative impact occurred largely during the first half of the 15-year period. Strategic learning appears to have led to a different response from incumbent supermarkets during 1985–1992. Change in prices was positively related to change in concentration and negatively related to entry.

The Price and Profit Performance of Leading Food Chains

The net profits and grocery prices of large food chains were found to be positively and significantly related to market concentration and a chains relative market share. The results refute the notion that higher profits for dominant firms in concentrated markets are due to efficiency and lower costs. Increased profits in noncompetitively structured markets accounted for about one-third of the increase in prices. Higher retailer costs in noncompetitive markets appear to stem from inefficiencies and cost increasing forms of competition.

A Prospective Assessment of the Impacts of Bovine Somatotropin: A Case Study of Wisconsin

The predicted effects of bST on aggregate supply, milk price, and farm structure is extremely sensitive to several key assumptions: the impact of bST on production per cow, cost of bST to farmers, returns required by farmers to adopt bST, price of milk when bST is introduced, speed and extent of adoption. A case study of Wisconsin dairy farms indicates that the overall economic impact of bST will be much less than most other studies have predicted. The projected effects, however, are similar to Cochranes treadmill theory, albeit less severe than predicted by earlier estimates.

domestic Market Structure and Performance in Global markets: Theory and Empirical Evidence form U.S. Food Manufacturing Industries

This paper formally articulates Porters hypothesis that the degree of competition in domestic markets is positively linked to performance in international markets. Hypotheses are tested using measures of the trade performance of U.S. food manufacturing industries as proxies for international competitiveness. Empirical results are generally consistent with Porters hypothesis; net export share is negatively related to industry concentration. The competitiveness of agricultural inputs, R & D intensity, and trade barriers of other countries were also found to be important determinants of the performance of these industries in global markets.

Short-Run Predictive Models for Retail Meat Sales

Demand analysis has long been a central concern of agricultural economists. Typically, price-quantity relationships have been examined using time-series data for various commodities for broad geographic areas. The results have proven useful for many types of decisions (Brandow, Breimyer), but they are of limited value at those stages in the food system where specific products are traded (round steak or ground beef rather than U.S. Choice beef carcasses), where the sales of an individual firm must be estimated rather than the sales of all firms in a market or region, and in those situations where firms operate in a short-term decision environment with short-run variations in demand that are not accounted for in traditional demand models. All of these conditions hold for individual retail food firms. Short-run variations in the demand faced by food retailers are particularly troublesome in accurately anticipating sales. Retailers operate in local markets with considerable interdependence with other retail food firms. The behavior of competitors is difficult to anticipate and thus may alter the demand faced by a particular firm from week to week. In addition, industry personnel contend that other factors also influence short-run demand and/or sales. These include weekly advertised specials, merchandising variables such as the closeness of trim or the size and location of displays, and closeness to payday. Variations in the farm and wholesale prices of commodities such as broilers, beef, and pork (as well as many other agricultural commodities) are often substantial from week to week or even within a single week. While variations in supply account for some of the variation in prices, industry participants have also contended that variations in demand-largely due to supermarket specialling activity--are also important causes of short-run price instability. The research summarized in this paper examines the weekly price-quantity relationships for specific meat products at the retail store level. It is thus concerned with short-run demand relationships that have a direct bearing on the pricing, ordering, and inventory control tasks of retail food firms, and that also influence the short-run derived demand sched-

Market Power in the Cheese Industry: Further Evidence

The recent public disclosure of proprietary information providesinsights into the pricing conduct and performance of leadingcheese marketers. Most important, the evidence supports thehypotheses that following its acquisition by Philip Morris in1988, Kraft became particularly aggressive strategically,both byselling on the NCE to drive bulk cheese prices lower and byincreasing the selling prices and gross profit margins on theirfinished cheese. The result was significantly higher prices toconsumers and lower prices to suppliers of bulk cheese, as Kraftsgross profit margins rose from an estimated

Price Leadership on the National Cheese Exchange

880 million in1989 to

Interrelationships of market structure, competitive behavior, and market/firm performance: The state of knowledge and some research opportunities

1020 million in 1991.

Government Regulation of Competition in the Food Industry

The motivation and trading behavior of the leading cheese companies on the National Cheese Exchange are examined. Although only 0.2 percent of all cheese is sold on the NCE, it is used to formula-price 90-95 percent of the bulk cheese in the U.S. Kraft General Foods, the largest buyer of cheese in the U.S., was the dominant seller on the NCE during 1988-1993, with the apparent purpose and effect of depressing national cheese prices. Krafts behavior is consistent with that of a barometric price leader that enjoys a significant degree of discretion in shaping the pattern of prices over a price cycle. As presently organized, the NCE facilitates market manipulation.