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Quality Choices in a Vertical Structure: National Brands vs Private Labels in Grocery Retailing

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  • Fousekis, Panos

Abstract

The paper analyzes quality choices in a vertical structure involving a monopolist food manufacturer (national brand-NB producer) and a monopolist retailer supplying both the national brand as well as a private label (PL). The analysis is based on a threestage dynamic game. According to the results, in the Nash equilibrium the two players choose the maximum possible qualities for their products. This means that the B food manufacturer seeks the maximum product differentiation, while the LP retailer seeks the minimum product differentiation. The behavior of the two players appears to be consistent with actual developments in the food markets as well as with earlier empirical studies documenting the efforts of NB food manufacturers to increase product differentiation.

Suggested Citation

  • Fousekis, Panos, 2010. "Quality Choices in a Vertical Structure: National Brands vs Private Labels in Grocery Retailing," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 11(2), June.
  • Handle: RePEc:ags:aergaa:118673
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    File URL: http://purl.umn.edu/118673
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    References listed on IDEAS

    as
    1. Avenel, E. & Caprice, S., 2006. "Upstream market power and product line differentiation in retailing," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 319-334, March.
    2. Mills, David E, 1999. "Private Labels and Manufacturer Counterstrategies," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 26(2), pages 125-145, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Quality Choice; ational Brand; Private Label; Agribusiness; D21; Q13;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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