IDEAS home Printed from https://ideas.repec.org/p/ali/wpaper/2014-02.html
   My bibliography  Save this paper

Optimal production channel for private labels: Too much or too little innovation?

Author

Listed:
  • Claire Chambolle

    () (INRA-UR1303 ALISS)

  • Clémence Christin

    () (Normandie Université, UCBN, CREM-UMR CNRS 6211)

  • Guy Meunier

    () (INRA-UR1303 ALISS)

Abstract

We analyze the impact of the private label production channel on innovation. A retailer may either choose to integrate backward with a small firm (insourcing) or rely on a national brand manufacturer (outsourcing) to produce its private label. The trade-off between insourcing and outsourcing strategies is a choice between too much or too little innovation (i.e. quality investment) on the private label. When insourcing, an outside-option effect leads the retailer to over-invest to increase its buyer power. When outsourcing, a hold-up effect leads to under-investment. In addition, selecting the national brand manufacturer may create economies of scale that spur innovation.

Suggested Citation

  • Claire Chambolle & Clémence Christin & Guy Meunier, 2014. "Optimal production channel for private labels: Too much or too little innovation?," Working Papers 2014-02, Alimentation et Sciences Sociales.
  • Handle: RePEc:ali:wpaper:2014-02
    as

    Download full text from publisher

    File URL: http://www6.versailles-grignon.inra.fr/aliss/content/download/3814/37397/file/AlissWP_2014_02_Chambolle_Christin_Meunier.pdf
    File Function: Full text
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Soberman, David A. & Parker, Philip M., 2004. "Private labels: psychological versioning of typical consumer products," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 849-861, June.
    2. Mills, David E, 1995. "Why Retailers Sell Private Labels," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(3), pages 509-528, Fall.
    3. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    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. Daniel P. O'Brien & Greg Shaffer, 1997. "Nonlinear Supply Contracts, Exclusive Dealing, and Equilibrium Market Foreclosure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 755-785, December.
    6. repec:eee:ijrema:v:30:y:2013:i:4:p:343-357 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Claire Chambolle & Sofia Villas-Boas, 2007. "Buyer Power through Producer's Differentiation," Working Papers hal-00243058, HAL.
    2. Chambolle, Claire & Villas-Boas, Sofia B., 2015. "Buyer power through the differentiation of suppliers," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 56-65.
    3. Inderst, Roman & Jakubovic, Zlata & Jovanovic, Dragan, 2015. "Buyer Power and Functional Competition for Innovation," MPRA Paper 61214, University Library of Munich, Germany.
    4. Claire Chambolle & Clémence Christin, 2017. "New Product Introduction and Slotting Fees," Working Papers hal-01458949, HAL.

    More about this item

    Keywords

    Private label; vertical relations; buyer power; innovation;

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ali:wpaper:2014-02. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Repec ALISS). General contact details of provider: http://edirc.repec.org/data/corelfr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.