Product Differentiation and Brand Competition in the Italian Breakfast Cereal Market: a Distance Metric Approach

Abstract

This article employs a nation-wide sample of supermarket scanner data to study product and brand competition in the Italian breakfast cereal market. A modified Almost Ideal Demand System (AIDS), that includes Distance Metrics (DMs) as proposed by Pinkse, Slade and Brett (2002), is estimated to study demand responses, substitution patterns, own-price and cross-price elasticities. Estimation results provide evidence of some degree of brand loyalty, while consumers do not seem loyal to the product type. Elasticity estimates point out the presence of patterns of substitution within products sharing the same brand and similar nutritional characteristics.