managerial economics
Coca-Cola
Pricing power and demand forecasting, on Coca-Cola's real numbers.
MBA group project (Group 4) · managerial economics
A managerial-economics study of The Coca-Cola Company — how an oligopoly with a powerful brand sets and defends its prices, what the price, income and cross elasticities of its demand actually are, and a demand forecast built on five years of real monthly data.
The analysis
A two-player game with a brand moat
How sensitive is Coke to price?
Five years of data, one working model
Market structure
Coca-Cola operates in a textbook oligopoly — effectively a two-player game with Pepsi — where the firms are interdependent, barriers to entry are high, and competition runs on brand, distribution and advertising rather than price. A price war would be mutually destructive, so the rivalry stays non-price. That structure is exactly what hands Coke its pricing power.
Elasticity of demand
Using a 50-person primary survey alongside secondary data, the study estimates three elasticities of Coke's demand: price (how volume responds to its own price), income (how it responds to buyers' income), and cross-price (how it responds to Pepsi's price). The headline: demand is price-inelastic — a price rise barely dents volume, because brand loyalty is doing the work.
Why the pricing power holds
Inelastic demand plus a strong brand is a margin machine: Coke can raise prices without losing the volume a commodity seller would. The cross-price elasticity confirms the Pepsi rivalry — but since neither can win on price, both compete on brand instead.
Demand forecasting
Finally the economics becomes a forecast: five years of monthly data (Jan 2020 – Apr 2025) modelled with a linear trend for the underlying direction and a ratio-to-trend method for the seasonal swings, then projected forward — turning the analysis into an actual number.
What I took from it
It is one thing to define elasticity in an exam and another to estimate it from real survey data and defend a forecast. This one was about making the textbook concepts actually compute on a real company's numbers.