Demand estimation and firm pricing

We have been pursuing several projects that analyse consumer behaviour in supermarkets. One project, ‘Sin Taxes in Differentiated Product Oligopoly: an Application to the market for butter and margarine’, studies consumer demand for butter, margarine and saturated fat and evaluates how this demand responds to price changes. It also studies how firms might respond to such a tax. It shows that the impact of a tax on saturated fat is much different if one acknowledges that firms are likely to respond to a tax by changing prices. A working paper was published in December 2010 and revised in February 2011. Three related papers are studying demand for alcohol and its response to price changes, demand for fruit and vegetables and the impact of the government’s ‘five-a-day’ campaign and consumer choice of store. These papers are in progress. Similar methods were applied to the analysis of ‘A disaggregate demand for local bus service in Great Britain’. This study used the UK National Transport Survey to study demand for local bus service. It found that at the disaggregate level, elasticities of bus demand range from -0.2 to -1.2 while at the aggregate level they are around -0.5. This study was submitted as evidence in the UK Competition Commission’s investigation of the market for local bus services. Finally, we pursued work on an analysis of online automobile auctions. This work is using detailed data on 10 years of online auctions and variation in reserved prices to study the causal impact of reserve price on auction outcomes.