Welfare analysis of introducing private label packaged salads into the US market

Abstract

AbstractIn this study, we use the Berry, Levinsohn, and Pakes (BLP) method to study consumer demand and firm supply to the 2005 US market for packaged salads. Our results show that, although consumers in general are price sensitive, their sensitivity decreases as income increases. Moreover, consumers exhibit strong brand loyalty if they prefer specific features, such as the organic claim of a brand. Using our estimation results, we conduct a welfare analysis of introducing private label (store brands) packaged salads. Our results show that the hypothetical elimination of private label brands would result in the packaged salad market becoming less competitive, implying total welfare increased and consumers fared much better after the introduction of private label packaged salads. [EconLit citations: D12, Q13, Q18].