Files

Abstract

In this paper, we develop and estimate a model of strategic firm behavior under financial market uncertainty. The model employs an objective function derived from the capital asset pricing model (CAPM), which draws theoretical linkages between product market uncertainty and financial market returns. An interesting feature of the model is that profit maximization enters as a nested component of the general market value maximization (MVM) model. The model is tested using 4-week interval retail scanner data for margarine and butter from 1998-2002. The traditional profit maximization model is rejected in favor of the proposed MVM structure. Counterfactual simulations point toward significant biases in estimated Lerner indexes when capital market dimensions are ignored or if the wrong market structure is assumed.

Details

PDF

Statistics

from
to
Export
Download Full History