IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Own-Brand and Cross-Brand Retail Pass-Through

  • David Besanko


    (Kellogg School of Management, Northwestern University, Evanston, Illinois 60208)

  • Jean-Pierre Dubé


    (Graduate School of Business, University of Chicago, Chicago, Illinois 60637)

  • Sachin Gupta


    (Johnson Graduate School of Management, Cornell University, Ithaca, New York 14853)

Registered author(s):

    In this paper we describe the pass-through behavior of a major U.S. supermarket chain for 78 products across 11 categories. Our data set includes retail prices and wholesale prices for stores in 15 retail price zones for a one-year period. For the empirical model, we use a reduced-form approach that focuses directly on equilibrium prices as a function of exogenous supply- and demand-shifting variables. The reduced-form approach enables us to identify the theoretical pass-through rate without specific assumptions about the form of consumer demand or the conduct of a category-pricing manager. Thus, our measurements of pass-through are not constrained by specific structure on the underlying economic model. The empirical pricing model includes costs of all competing products in the category on the right-hand side (not only the cost of the focal brand) and yields estimates of both own-brand and cross-brand pass-through rates. Our results provide a rich picture of the retailer's pass-through behavior. We find that pass-through varies substantially across products and across categories. Own-brand pass-through rates are, on average, more than 60% for 9 of 11 categories, a finding that is at odds with the claims of manufacturers about retailers in general. Importantly, we find substantial evidence of cross-brand pass-through effects, indicating that retail prices of competing products are adjusted in response to a change in the wholesale price of any given product in the category. We find that cross-brand pass-through rates are both positive and negative. We explore determinants of own-brand and cross-brand pass-through rates and find strong evidence in multiple categories of asymmetric retailer response to trade promotions on large versus small brands. For example, brands with larger market shares, and brands that contribute more to retailer profits in the category, receive higher pass-through. We also find that trade promotions on large brands are less likely than small brands to generate positive cross-brand pass-through, i.e., induce the retailer to reduce the retail price of competing smaller products. On the other hand, small share brands are disadvantaged along three dimensions. Trade promotions on small brands receive low own-brand pass-through generate positive cross-brand pass-through for larger competing brands. Moreover, small share brands do not receive positive cross pass-through from trade promotions on these larger competitors. We also find that store brands are similarly disadvantaged with respect to national brands.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Article provided by INFORMS in its journal Marketing Science.

    Volume (Year): 24 (2005)
    Issue (Month): 1 (July)
    Pages: 123-137

    in new window

    Handle: RePEc:inm:ormksc:v:24:y:2005:i:1:p:123-137
    Contact details of provider: Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA
    Phone: +1-443-757-3500
    Fax: 443-757-3515
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:24:y:2005:i:1:p:123-137. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.