A Benefit-Function Approach to Studying Market Power: An Application to the U.S. Yogurt Market

Abstract

This article provides a structural framework for studying the market performance of various food industries. It revisits the benefit-function approach to modeling demand and extends its application to the empirical industrial-organization literature. We illustrate the empirical value of our model in an econometric analysis of competitive conditions in the retail market for branded yogurt. The results show that retailers are engaged in imperfect competition. Furthermore, national brand yogurt remains an important tool for retail profitability.

Keywords

• benefit function
• conjectural variation
• market performance
• retail competition
• yogurt