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Store loyalty, bargaining power and the private label production issue


  • Fabian Bergès-Sennou


One of many explanations offered for the rise of private labels (PLs) is that they increase the bargaining power of the retailer. The prior question of the PL production assignment has not been analysed in an economic framework. The retailer can either entrust the production of his PL to the national brand (NB) manufacturer at a low unit cost, with the disadvantage that both products (NB and PL) are held by the same agent, or he can choose a firm from the competitive fringe with a higher unit production cost. In a framework where loyalty (presence of store-switching and brand-switching consumers) and bargaining strength count, we show that the retailer will assign his PL production to the NB manufacturer when the latter's bargaining power is low. However, a higher consumer loyalty for the NB can reverse the retailer's decision. Copyright 2006, Oxford University Press.

Suggested Citation

  • 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, vol. 33(3), pages 315-335, September.
  • Handle: RePEc:oup:erevae:v:33:y:2006:i:3:p:315-335

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    Cited by:

    1. Stiegert, Kyle W. & Hovhannisyan, Vardges, 2009. "Chapter 7: Food Retailing in the United States: History, Trends, Perspectives," Structural Changes in Food Retailing: Six Country Case Studies 60678, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    2. Hovhannisyan, Vardges & Stiegert, Kyle W., 2011. "Imperfect Competition between Milk Manufacturers and Retailers in a Midwestern State in the U.S," 2011 Annual Meeting, February 5-8, 2011, Corpus Christi, Texas 98844, Southern Agricultural Economics Association.
    3. Hovhannisyan, Vardges & Stiegert, Kyle W., 2011. "Vertical Channel Analysis of the U.S. Milk Market," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103631, Agricultural and Applied Economics Association.
    4. Johansen, Bjørn Olav, 2012. "Private Labels, Rent Shifting And Consumer Welfare," Working Papers in Economics 02/12, University of Bergen, Department of Economics.
    5. Anonymous & Kim, Dong Hwan, 2009. "Structural Changes in Food Retailing: Six Country Case Studies," Structural Changes in Food Retailing: Six Country Case Studies 100443, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    6. Bonnet, Céline & Requillart, Vincent, 2010. "Is The Eu Sugar Policy Reform Likely To Increase Obesity?," 115th Joint EAAE/AAEA Seminar, September 15-17, 2010, Freising-Weihenstephan, Germany 116414, European Association of Agricultural Economists;Agricultural and Applied Economics Association.
    7. Fabian Bergès & Valérie Orozco, 2010. "Measures of store loyalty in French food retailing," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 91(3), pages 261-277.

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