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Is producing a private label counterproductive for a branded manufacturer?

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  • Fabian Berg�s
  • Zohra Bouamra-Mechemache

Abstract

Branded food manufacturers vindicate the use of excess production capacities to justify their production of retailers’ brands. We study the distributor's and food manufacturer's private label (PL) strategy for production within a framework featuring endogenous store brand quality, bargaining power, possible differences in production technology and potential capacity constraints for the branded manufacturer. Depending on the structure of capacity constraint (applying to both products or to the PL only), we find that the retailer may prefer to choose an independent firm for the production of the store brand whereas the branded manufacturer is chosen in the case of excess capacity. , Oxford University Press.

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Article provided by Foundation for the European Review of Agricultural Economics in its journal European Review of Agricultural Economics.

Volume (Year): 39 (2012)
Issue (Month): 2 (April)
Pages: 213-239

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Handle: RePEc:oup:erevae:v:39:y:2012:i:2:p:213-239

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References

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  1. Berges-Sennou, Fabian & Hassan, Daniel & Monier-Dilhan, Sylvette & Raynal, Helene, 2007. "Consumers' Decision between Private Labels and National Brands in a Retailer's Store: A Mixed Multinomial Logit Application," 103rd Seminar, April 23-25, 2007, Barcelona, Spain, European Association of Agricultural Economists 9407, European Association of Agricultural Economists.
  2. Bontemps, Christophe & Orozco, Valérie & Réquillart, Vincent, 2008. "Private Labels, National Brands and Food Prices," IDEI Working Papers 402, Institut d'Économie Industrielle (IDEI), Toulouse.
  3. Bontems, Philippe & Monier-Dilhan, Sylvette & Requillart, Vincent, 1999. "Strategic Effects of Private Labels," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 26(2), pages 147-65, June.
  4. Fabian Bergès-Sennou, 2006. "Store loyalty, bargaining power and the private label production issue," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 33(3), pages 315-335, September.
  5. Mills, David E, 1995. "Why Retailers Sell Private Labels," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(3), pages 509-28, Fall.
  6. Staahl Gabrielsen, T. & Sorgard, L., 2000. "Private Labels, Price Rivalry, and Public Policy," Papers, Norwegian School of Economics and Business Administration- 8/00, Norwegian School of Economics and Business Administration-.
  7. André Bonfrer & Pradeep K. Chintagunta, 2004. "Store Brands: Who Buys Them and What Happens to Retail Prices When They Are Introduced?," Review of Industrial Organization, Springer, Springer, vol. 24(2), pages 195-218, 03.
  8. Mills, David E, 1999. "Private Labels and Manufacturer Counterstrategies," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 26(2), pages 125-45, June.
  9. William Comanor & Patrick Rey, 2000. "Vertical Restraints and the Market Power of Large Distributors," Review of Industrial Organization, Springer, Springer, vol. 17(2), pages 135-153, September.
  10. Bergès-Sennou Fabian & Bontems Philippe & Réquillart Vincent, 2004. "Economics of Private Labels: A Survey of Literature," Journal of Agricultural & Food Industrial Organization, De Gruyter, De Gruyter, vol. 2(1), pages 1-25, February.
  11. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  12. Michael B. Ward & Jay P. Shimshack & Jeffrey M. Perloff & J. Michael Harris, 2002. "Effects of the Private-Label Invasion in Food Industries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 84(4), pages 961-973.
  13. de Meza, David, 1997. "Product Diversity under Monopoly: Two High Quality Results," Bulletin of Economic Research, Wiley Blackwell, vol. 49(2), pages 169-71, April.
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Cited by:
  1. Tamini, Lota Dabio, 2012. "Optimal quality choice under uncertainty on market development," Working Papers, Structure and Performance of Agriculture and Agri-products Industry (SPAA) 148589, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
  2. Tamini, Lota D., 2012. "Optimal quality choice under uncertainty on market development," MPRA Paper 40845, University Library of Munich, Germany.

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