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Abstract

The current research develops a model of pricing in imperfectly competitive markets based on the Stackelberg price leadership behavior model to explain pricing strategies in the high fructose corn syrup (HFCS) and sugar industries in the United States. The model assumes that demanders of HFCS are represented by soft drinks and processed food manufactures that use HFCS as an input. It derives a reaction function for the price of HFCS and a conjectural variations function. The conjectural variations function suggests that the price of sugar is higher than the price of HFCS. The results show that the price of sugar plays an important role in the pricing strategy of the HFCS industry and that a unit increase in the price of sugar increases the price of HFCS by less than the unit increase in the price of sugar.

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