We estimate the evolution of competition in the ready-to-eat cereal industry. To separately identify detailed patterns of industry conduct from unobserved marginal cost shocks, we construct novel instruments that interact data on rival firms’ promotions with measures of products’ relative isolation in the characteristics space. We find strong evidence for partial price coordination among cereal manufacturers in the beginning of our sample. After a merger in 1993 conduct becomes more competitive and on average consistent with multiproduct Nash pricing. The last part of our sample is characterized by even more aggressive pricing, implying median wholesale margins of less than 5%.

We study the identification of dynamic discrete choice models with hyperbolic discounting using a terminating action. We provide novel identification results for both sophisticated and naive agents’ discount factors and their utilities in a finite horizon framework under the assumption of a stationary flow utility. In contrast to existing identification strategies we do not require to observe the final period for the sophisticated agent. Moreover, we avoid normalizing the flow utility of a reference action for both the sophisticated and the naive agent. We propose two simple estimators and show that they perform well in simulations.