@techreport{NBERw6387,
 title = "Measuring Market Power in the Ready-to-Eat Cereal Industry",
 author = "Aviv Nevo",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "6387",
 year = "1998",
 month = "January",
 URL = "http://www.nber.org/papers/w6387",
 abstract = {The ready-to-eat cereal industry is characterized by high concentration margins, large advertising to sales ratios, and numerous introductions of new products.  Previous researchers have concluded that the ready-to-eat cereal industry is a classic example of an industry with nearly collusive pricing behavior and intense non-price competition.  This paper empirically examines this conclusion.  In particular, I estimate price-cost margins importantly I am able empirically to separate these margins into three parts: (1) that which is due to product differentiation; (2) that which is due to multi-product firm pricing; and (3) that due to potential price collusion.  The results suggest that given the demand for different brands of cereal, the first two effects explain most of the observed price-cost markups.  I conclude that prices in the industry are consistent with non-collusive pricing behavior to maintain a portfolio of differentiated products influence the perceived quality of these products, and it is these two factors that lead to high price-cost margins.},
}