Economics at your fingertips  

Strategic Effects of Private Labels

Philippe Bontems, Sylvette Monier-Dilhan and Vincent Réquillart

European Review of Agricultural Economics, 1999, vol. 26, issue 2, 147-65

Abstract: This paper presents a model of retailer-manufacturer interaction that focuses on retail competition between national brands and private labels positioned by retailers to compete with them. The final demand side involves vertical differentiation between the private label (low quality) and the national brand (high quality). It is assumed that production costs for the national brand and the private label differ not only by sunk costs (advertising) but also by marginal costs, and that the marginal cost function is increasing and convex in quality. We study equilibrium price strategies for both agents when the quality of the private label varies and we compute the optimal private label quality from the retailer's point of view. We also determine the effect of the private label on the agents' profits. Our results suggest that the wholesale price of the branded good may increase as the private label good becomes a closer substitute for it. Moreover, introducing a private label reduces the double marginalisation problem in the vertical structural. Copyright 1999 by Oxford University Press.

Date: 1999
References: Add references at CitEc
Citations: View citations in EconPapers (59) Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Strategic effects of private labels (1999)
Working Paper: Strategic effects of private labels (1998)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

European Review of Agricultural Economics is currently edited by Timothy Richards, Salvatore Di Falco, Carl-Johan Lagerkvist and Celine Nauges

More articles in European Review of Agricultural Economics from Foundation for the European Review of Agricultural Economics Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().

Page updated 2023-06-05
Handle: RePEc:oup:erevae:v:26:y:1999:i:2:p:147-65