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Private Label Sourcing Negotiation: Premium PL from Dual Brander

In: Advances in National Brand and Private Label Marketing

Author

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  • S. Chan Choi

    (Rutgers Business School – Newark & New Brunswick)

Abstract

As private labels become proliferated, retailers are introducing premium PLs that replace marginal national brands. We examine a special case of tiered private label sourcing, in which a premium PL is supplied by the manufacturer of the corresponding NB (dual brander), and an economy PL is supplied by a dedicated PL supplier. In our model, the NB’s wholesale and retail prices are determined by the traditional bilateral Nash game. However, the premium PL’s wholesale price is determined through a profit-sharing negotiation between the channel members. From an equilibrium-negotiation solution, we derive profit implications of NB’s brand equity, the retailer’s reputation, and the intrinsic quality of the NB. Interestingly, even if the retails holds a strong negotiation power, we find it optimal for the retailer leave some chips on the table for the NB manufacturer.

Suggested Citation

  • S. Chan Choi, 2018. "Private Label Sourcing Negotiation: Premium PL from Dual Brander," Springer Proceedings in Business and Economics, in: Francisco J. Martínez-López & Juan Carlos Gázquez-Abad & Alexander Chernev (ed.), Advances in National Brand and Private Label Marketing, pages 135-142, Springer.
    • Handle: RePEc:spr:prbchp:978-3-319-92084-9_15
    DOI: 10.1007/978-3-319-92084-9_15
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