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An option-pricing look at the introduction of private labels

Author

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  • I Horowitz

    (University of Florida and City University of Hong Kong)

Abstract

This paper uses an option-pricing model to explore the impact of various factors on whether and when a retailer will choose to introduce a private label in a product category that is currently the exclusive domain of a manufacturer. Among the factors considered are the retailer's and manufacturer's margins, the cost of introducing the private label, the shelf space to be devoted to the private label and by consequence the store-market share to be captured by it, and the quality of the private label.

Suggested Citation

  • I Horowitz, 2000. "An option-pricing look at the introduction of private labels," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 51(2), pages 221-230, February.
    • Handle: RePEc:pal:jorsoc:v:51:y:2000:i:2:d:10.1057_palgrave.jors.2600847
    DOI: 10.1057/palgrave.jors.2600847
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    Citations

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    Cited by:

    1. Arcan Nalca, & Tamer Boyaci, & Saibal Ray, 2017. "Brand positioning and consumer taste information," ESMT Research Working Papers ESMT-17-01_R1, ESMT European School of Management and Technology, revised 04 Dec 2017.
    2. Amrouche, Nawel & Pei, Zhi & Yan, Ruiliang, 2022. "Mail-in-rebate and coordination strategies for brand competition," International Journal of Production Economics, Elsevier, vol. 247(C).
    3. Ru, Jun & Sethi, Suresh & Shi, Ruixia & Zhang, Jun, 2023. "Channel power shift and store brand introduction," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 179(C).
    4. Perloff, Jeffrey M. & LaFrance, Jeffrey T. & Chouinard, Hayley H., 2012. "Brand name and private label price setting by a monopoly store," Economics Letters, Elsevier, vol. 116(3), pages 508-511.
    5. Pritha Ghosh & Subrata Saha & Shamindra Nath Sanyal & Swati Mukherjee, 2021. "Positioning of private label brands of men’s apparel against national brands," Journal of Marketing Analytics, Palgrave Macmillan, vol. 9(3), pages 210-227, September.
    6. Nalca, Arcan & Boyaci, Tamer & Ray, Saibal, 2018. "Brand positioning and consumer taste information," European Journal of Operational Research, Elsevier, vol. 268(2), pages 555-568.
    7. Sherif Nasser & Danko Turcic & Chakravarthi Narasimhan, 2013. "National Brand's Response to Store Brands: Throw In the Towel or Fight Back?," Marketing Science, INFORMS, vol. 32(4), pages 591-608, July.
    8. Amrouche, Nawel & Yan, Ruiliang, 2015. "Aggressive or partnership strategy: Which choice is better for the national brand?," International Journal of Production Economics, Elsevier, vol. 166(C), pages 50-63.
    9. Arcan Nalca, & Tamer Boyaci, & Saibal Ray, 2017. "Consumer taste uncertainty in the context of store brand and national brand competition," ESMT Research Working Papers ESMT-17-01, ESMT European School of Management and Technology.
    10. Junyi Zhong & Jiazhen Huo, 2022. "Impacts of Power Structure on Introduction of Green Store Brand," Sustainability, MDPI, vol. 14(19), pages 1-33, September.
    11. Liang, Donghan & Li, Gang & Sun, Linyan & Chen, Yubao, 2013. "The role of rebates in the hybrid competition between a national brand and a private label with present-biased consumers," International Journal of Production Economics, Elsevier, vol. 145(1), pages 208-219.
    12. Raj Sethuraman, 2009. "Assessing the External Validity of Analytical Results from National Brand and Store Brand Competition Models," Marketing Science, INFORMS, vol. 28(4), pages 759-781, 07-08.
    13. Groznik, Ana & Heese, H. Sebastian, 2010. "Supply chain interactions due to store-brand introductions: The impact of retail competition," European Journal of Operational Research, Elsevier, vol. 203(3), pages 575-582, June.
    14. Arvind Shroff & Bhavin J. Shah & Hasmukh Gajjar, 2021. "Shelf space allocation game with private brands: a profit-sharing perspective," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 20(2), pages 116-133, April.

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