Main fields: Industrial Organisation and Applied Microeconomics
Price discrimination in organic food markets: the case of ready-to-eat cereal
Abstract: In this paper price discrimination with respect to the organic attribute on the ready-to-eat cereal industry is quantified. I estimate a random coefficient discrete choice demand model to obtain the price-elasticity of each product. Then, with the estimated elasticities and a supply
model I recover the marginal costs, which allows to disentangle whether the amount of price difference between organic and non-organic products is due to price discrimination or due to different production costs. I find that around 6% of the price difference are due to price
discrimination with respect to this attribute. A counterfactual exercise shows that a tax on non-organic products is welfare detrimental and do not substantially reduce price discrimination.