Private Labels, Rent Shifting And Consumer Welfare
AbstractThis paper investigates a retailer's decision to introduce a private label and asks how the retailer's access to a private label may affect the pricing of substitute national brands. We consider a model with two vertically differentiated national brand manufacturers that negotiate sequentially with a monopolist retailer over two-part tariffs. We find that when the retailer decides to introduce a private label, this generates a price increase for one of the two national brands. Moreover, when we endogenise the order of negotiations, we find that i) the retailer?s private label is always introduced, and ii) the private label always causes a price increase for the high-quality national brand only. In our model, this price increase does not occur due to a price discrimination effect, as in Gabrielsen and Sørgard (2007) ["Private labels, price rivalry, and public policy", European Economic Review, (51), 403-424], but as a result of a rent-shifting effect. The welfare implications of private label introduction are discussed.
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Bibliographic InfoPaper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 02/12.
Length: 65 pages
Date of creation: 31 Jan 2012
Date of revision:
Contact details of provider:
Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
Web page: http://www.uib.no/econ/en
More information through EDIRC
private labels; national brands; rent shifting; public policy;
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
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