A Positive Theory of Private Label: A Strategic Role of Private Label in a Duopoly National-Brand Market

Chi-Cheng Wu () and Chih-Jen Wang ()

Marketing Letters, 2005, vol. 16, issue 2, 143-161

Abstract: This article offers an economic rationale for national brands to provide private labels to their retailers. We build a game-theoretic model that analyzes the interactions among two national brand manufacturers and one common retailer. In an interesting strategic role, the private label mitigates the promotion competition between the two national brands and provides benefits for all three members in the channel. Our analysis shows that offering a private label can be a credible commitment from a national brand manufacturer that it will not engage in promotions and decrease the incentive of the national brand rival to engage in promotions. In this way, we attempt to provide a reason for why national brand manufacturers provide retailers with private labels in practice. In addition, we discuss the optimal quality level of private labels. Copyright Springer Science + Business Media, Inc. 2005

Keywords: private label; store brand; competition; channel; common retailer (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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DOI: 10.1007/s11002-005-3266-4

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