Profitability and product differentiation in Greek food industries

Abstract

This paper explains the increasing difference between the profit margins of differentiated and undifferentiated Greek food manufacturing industries between 1988 and 1994, using panel data. The 2SLS results for the fixed effects model show important differences across the high, medium and low differentiated industry groups. The increasing difference between the margins of the highly differentiated group - which includes the most profitable industries - and the other groups can be mainly attributed to the greater sensitivity of margins in differentiated industries to advertising and demand changes.