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Competitive and welfare effects of private label presence in differentiated food markets

Author

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  • Giulia Tiboldo
  • Alessandro Bonanno
  • Rigoberto A. Lopez
  • Elena Castellari

Abstract

Private labels (PLs), originally introduced by food retailers as low-priced alternatives to national brands, have expanded in recent years in premium market segments. This article examines how the presence of different types of PLs affect prices, competition, and overall welfare. Using estimates from a random coefficients logit demand model and retail scanner data of yogurt sales from 17 regions in Italy, we simulate counterfactual scenarios where different types of PLs – namely 1) horizontally differentiated; 2) vertically differentiated; and 3) both types – are no longer in the market. The empirical results show that PLs are social-welfare enhancing, playing a pro-competitive role that benefits consumers. Also, in both a relative and an absolute sense, the welfare-increasing effect of PLs presence is more significant for horizontally differentiated PLs than for vertically differentiated ones.

Suggested Citation

  • Giulia Tiboldo & Alessandro Bonanno & Rigoberto A. Lopez & Elena Castellari, 2021. "Competitive and welfare effects of private label presence in differentiated food markets," Applied Economics, Taylor & Francis Journals, vol. 53(24), pages 2713-2726, May.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:24:p:2713-2726
    DOI: 10.1080/00036846.2020.1866160
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    Cited by:

    1. Anderson, Simon & Bedre-Defolie, Özlem, 2022. "Online trade platforms: Hosting, selling, or both?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 84, pages 1-15.
    2. Inge Geyskens & Barbara Deleersnyder & Marnik G. Dekimpe & Didi Lin, 2024. "Do consumers benefit from national-brand listings by hard discounters?," Journal of the Academy of Marketing Science, Springer, vol. 52(1), pages 97-118, January.

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