Income and Wealth Effects on Private-Label Demand: Evidence from the Great Recession

Jean-Pierre Dubé (), Günter J. Hitsch () and Peter E. Rossi ()
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Jean-Pierre Dubé: National Bureau of Economic Research, Cambridge, Massachusetts 02138; and Booth School of Business, University of Chicago, Chicago, Illinois 60637
Günter J. Hitsch: Booth School of Business, University of Chicago, Chicago, Illinois 60637
Peter E. Rossi: Anderson School of Management, University of California, Los Angeles, Los Angeles, California 90095

Marketing Science, 2018, vol. 37, issue 1, 22-53

Abstract: We measure the causal effects of income and wealth on the demand for private-label products. Prior research suggests that these effects are large and, in particular, that private-label demand rises during recessions. Our empirical analysis is based on a comprehensive household-level transactions database matched with price information from store-level scanner data and wealth data based on local house value indices. The Great Recession provides a key source of the variation in our data, showing a large and geographically diverse impact on household incomes over time. We estimate income and wealth effects using “within” variation of income, at the household level, and wealth, at the zip code level. Our estimates can be interpreted as income and wealth effects consistent with a consumer demand model based on utility maximization. We establish a precisely measured negative effect of income on private-label shares. The effect of wealth is negative but not precisely measured. However, the estimated effect sizes are small, by contrast to prior academic work and industry views. An examination of the possible supply-side response to the recession shows only small changes in the relative price of national-brand and private-label products. Our estimates also reveal a large positive trend in private-label shares that predates the Great Recession. We examine some possible factors underlying this trend, but find no evidence that it is systematically related to specific private-label quality tiers or to the overall rate of private-label versus national-brand product introductions.

Keywords: private label demand; income and wealth effects; recessions and consumer demand (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (32)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:37:y:2018:i:1:p:22-53

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