Title: Private Labels, Rent Shifting and Consumer Welfare
Abstract:This paper investigates a retailer's decision to introduce a private label and asks how the retailer's access to a private label may aect the pricing of substitute national brands. We consider a model...This paper investigates a retailer's decision to introduce a private label and asks how the retailer's access to a private label may aect the pricing of substitute national brands. We consider a model with two vertically dierentiated national brand manufacturers that negotiate sequentially with a monopolist retailer over two-part taris. We …nd that when the retailer decides to introduce a private label, this generates a price increase for one of the two national brands. Moreover, when we endogenise the order of negotiations, we …nd that i) the retailer's private label is always introduced, and ii) the private label always causes a price increase for the high-quality national brand only. In our model, this price increase does not occur due to a price discrimination eect, as in Gabrielsen and Sorgard (2007) (Private labels, price rivalry, and public policy, European Economic Review, (51), 403-424), but as a result of a rent-shifting eect. The welfare implications of private label introduction are discussed. JEL classi…cations: L11, L12, L40, L42Read More
Publication Year: 2011
Publication Date: 2011-01-01
Language: en
Type: preprint
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Cited By Count: 2
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