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Is producing a private label counterproductive for a branded manufacturer?

  • Fabian Berg�s
  • Zohra Bouamra-Mechemache

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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  1. G. Galizzi & L. Venturini & S. Boccaletti, 1997. "Vertical relationships and dual branding strategies in the Italian food industry," Agribusiness, John Wiley & Sons, Ltd., vol. 13(2), pages 185-195.
  2. Bergès-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 9407, European Association of Agricultural Economists.
  3. William Comanor & Patrick Rey, 2000. "Vertical Restraints and the Market Power of Large Distributors," Review of Industrial Organization, Springer, vol. 17(2), pages 135-153, September.
  4. Bergès-Sennou Fabian & Bontems Philippe & Réquillart Vincent, 2004. "Economics of Private Labels: A Survey of Literature," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 2(1), pages 1-25, February.
  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. Gabrielsen, Tommy Staahl & Sørgard, Lars, 2000. "Private Labels, Price Rivalry, and Public Policy," University of California at Santa Barbara, Economics Working Paper Series qt8wh900ks, Department of Economics, UC Santa Barbara.
  7. Bontemps, Christophe & Orozco, Valérie & Réquillart, Vincent, 2008. "Private Labels, National Brands and Food Prices," IDEI Working Papers 402, Institut d'Économie Industrielle (IDEI), Toulouse.
  8. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
  9. 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, vol. 24(2), pages 195-218, 03.
  10. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
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