Social consumption and price rigidity of quality-tier differentiated private labels

Sven Anders and Milena Beye

Applied Economics Letters, 2015, vol. 22, issue 11, 911-915

Abstract: We are interested in the extent to which quality-tier differentiation of private label (PL) contributes to explaining their greater price rigidity during holiday periods, when social consumption motives may influence retailer category management. After controlling for wholesale cost pass-through, product and store effects, we find social consumption theory to provide the best explanation for greater PL price rigidity during the Christmas period. Although this effect does not extend to other periods of peak demand or across product categories, our results underscore the importance of consumer considerations in firm-level price setting discussed by Blinder et al . (1998). More generally, this article emphasizes the growing importance of quality-tier differentiated PLs in retailer's pricing and promotional strategies.

Date: 2015
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DOI: 10.1080/13504851.2014.987910

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