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Bittmann, Thomas
Loy, Jens‐Peter
Anders, Sven
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[Journal:] Australian Journal of Agricultural and Resource Economics [ISSN:] 1467-8489 [Volume:] 64 [Issue:] 4 [Pages:] 1184-1209
This paper investigates the impact of product differentiation on firm‐specific and industry‐wide cost pass‐through in grocery retailing. We use attribute distance measures to model product differentiation based on a unique set of retail scanner data for ready‐to‐eat soup products in the Canadian market. Results from a panel error correction model suggest that product differentiation explains a significant share of the variation in the rate of cost pass‐through across products. More differentiated products are associated with lower rates of cost pass‐through of industry‐wide and higher pass‐through of firm‐specific costs shocks. The findings validate an oligopolistic model of product differentiation, where firms use differentiation as a non‐price competitive factor in strategic pricing decisions.
cost pass‐through
non‐price competition
product differentiation
industry‐wide costs
firm‐specific costs
food retail markets
ready‐to‐eat soups
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