PRIVATE LABELS AND RETAIL MARKET CONCENTRATION

Jorge Tarziján M ()
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Jorge Tarziján M: Escuela de Administración, Pontificia Universidad Católica de Chile

Abante, 2003, vol. 6, issue 1, 1-20

Abstract: This paper provides an analytical framework of retailer-manufacturer interaction that focuses on retail competition between a national brand and private labels. The aim of the paper is to analyze the effects of private-label marketing on the relative power of retailers vis-à-vis national brand manufacturers, allowing for different degrees of competition in the vertical structure. We investigate how retail market concentration affects the retailers' incentives to carry private label that are substitutes for national brands. Our findings suggest that private labels decrease prices to consumers, wholesale prices, national brand manufacturer profits and the double margin of the vertical structure and increases retailers' profits. However, the magnitude of such effects depends on the concentration of the retail market. This paper also shows that incentives to horizontal integration in retail markets increase when retailers may sell private labels in addition to national brands, and that these incentives are increasing in the quality of the private labels offered by them. Our results are especially interesting for Latin- American countries since we are observing both a strong consolidation of the retail industry in most of them and the simultaneous emergence of private labels.

Keywords: Vertical restraints; Horizontal integration (search for similar items in EconPapers)
JEL-codes: L13 L40 L81 (search for similar items in EconPapers)
Date: 2003
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