Wholesale Pricing with Incomplete Information about Private Label Products

Johannes Paha

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: This article provides a theoretical model analyzing wholesale pricing tariffs set by a monopolistic manufacturer for its branded product that is sold to final customers by a monopolistic retailer. The bargaining power of the downstream retailer is strengthened by offering also a vertically differentiated private label product whose production costs are known only incompletely to the upstream manufacturer. The model shows that the manufacturer can avoid double marginalization and implement the full information outcome by combining a quantity discount with a market-share discount where only a retailer with a strong private label retroactively receives an allowance. Under these circumstances it is unprofitable for the manufacturer to impose exclusive dealing on the retailer.

Keywords: Branded Products; Incomplete Information; Market-Share Discounts; Private Label Products; Wholesale Pricing (search for similar items in EconPapers)
JEL-codes: D42 D82 L15 L42 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2017
New Economics Papers: this item is included in nep-com, nep-ind, nep-ipr and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201736

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