1. The market for Kellogg's cereal is inelastic in that consumers are not very responsive to price changes as opposed to being willing to switch brands when prices go up ("Consumer Demand"). Although there are substitutes, Kellogg's branding and flavor make substitutes unacceptable to interested consumers. The lower-priced brands are typically perceived as inferior in taste and/or quality, whether these attributes are objectively determined or not.
             2. Kellogg's is a premium product, and its premium brand is well established internationally due to its substantial investment in advertising and its longstanding reputation in the cereal industry ("Case No: 23/LM/Apr02"). Non-premium brands offer similar products, but they cannot command the same prices as Kellogg's because of inferior product, weaker branding, or inferior packaging.
             3. For Kellogg's cereals, the psychological "reference price," or "what our mind tells us the product should cost" (Haggblom). According to Janiszewski and Cunha, the price the consumer was willing to pay for a 20 oz. box of Kellogg's Frosted Flakes in 2004-the date of the article-was $3.29 (537). In three experiments, the authors found the reference price for Kellogg's Frosted Flakes was $3.03 (Janiszewski & Cunha, 545).
             4. Kellogg's is the number 1 cereal company, just ahead of General Mills (Hannaford). In 2005, General Mills reported higher prices, lower interest expenses, and a 38% increase in quarterly profit, but its higher prices "led consumers to snatch up products by rivals such as Kellogg Co., the world's largest cereal maker" (Rudd). This indicates that Kellogg's prices are somewhat lower than those of General Mills.
             5. There are a number of psychological pricing factors that affect Kellog's cereal. Bias can affect pricing, for example. If the consumer is biased in favor of...