*We would like to thank Robert T. Masson, Oleg Melnikov, Ted O'Donoghue and George Jakubson, anonymous referees and especially the Editor for helpful comments. The authors remain solely responsible for any errors.
COST PASS-THROUGH IN DIFFERENTIATED PRODUCT MARKETS: THE CASE OF U.S. PROCESSED CHEESE*
Article first published online: 11 APR 2008
© 2008 The Authors
The Journal of Industrial Economics
Volume 56, Issue 1, pages 32–48, March 2008
How to Cite
KIM, D. and COTTERILL, R. W. (2008), COST PASS-THROUGH IN DIFFERENTIATED PRODUCT MARKETS: THE CASE OF U.S. PROCESSED CHEESE. The Journal of Industrial Economics, 56: 32–48. doi: 10.1111/j.1467-6451.2008.00331.x
- Issue published online: 11 APR 2008
- Article first published online: 11 APR 2008
In this paper, we estimate a mixed logit model for demand in the U.S. processed cheese market. The estimates are used to determine pass-through rates of cost changes under different behavioral regimes. We find that, under collusion, the pass-through rates for all brands fall between 21% and 31% while, under Nash-Bertrand price competition, the range of pass-through rates is between 73% and 103%. The mixed logit model provides a more flexible framework for studying pass-through rates than the logit model since the curvature of the demand functions depends upon the empirical distribution of consumer types.