| The three essays in this dissertation examine both price and non-price tools that manufacturers and retailers of differentiated products use to compete.;The first essay of the dissertation, titled as "Consumer Demand and Retailer Level Variety," empirically investigates how varieties of brands available at the retailer level affects consumers' choices, how retailers strategically set prices and varieties simultaneously, and how retailers change these strategic variables when there are exogenous changes in costs. We employ a random-coefficient logit model, which allows for flexible substitution patterns for differentiated products, to estimate demands for a set of soft-drink products available at some grocery stores in a panel dataset. The estimation explicitly accounts for the endogeneity of prices and varieties by using instrumental variables. The estimation results show a positive and statistically significant effect of retailer level variety on demand. We conduct a number of counter-factual experiments based on the demand estimates and the first-order conditions for retailers' profit maximizing problem to examine how retailers respond to an exogenous shock to costs by adjusting the prices and varieties. These experiment results indicate interesting combined pricing and variety strategies the retailers use to maintain a balance between the private label products and their national brands counterparts. The second essay, "WIC Contracts Spillover Effects," concerns whether and how winning the exclusive rights for supplying to the low-income participants of the special nutritional program for Women, Infants and Children (WIC) affects the demand of more affluent non-participants in the highly concentrated infant formula market. The empirical results show significant spillover effects that increase greatly over time and shed lights on the excessively large discounts the manufacturers bid in order to win the contracts. The third essay examines the validity of a common assumption that many well-known theoretical industrial models are based on---the exogenous existence of a certain fraction of "brand loyal" consumers. We find that both brand share and brand loyalty consumers are functions of frequency of brand-specific sales and consumer demographics. More specifically, more consumers are loyal when there are more sales. |
