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Is Producing a Private Label Counterproductive for a Branded Manufacturer?

  • Bergès, Fabian
  • Bouamra-Mechemache, Zohra

Branded food manufacturers vindicate the use of excess production capacities (idle otherwise) to justify their production of retailers' brands. We study the distributor and food manufacturer's private label strategy for production within a framework featuring endogenous store brand quality, bargaining power, possible differences in production technology and potential capacity constraint for the branded manufacturer. According to the structure of capacity constraint (applying to both products or private label only), the retailer may prefer to choose an independent firm whereas he selected the branded manufacturer when unconstrained. The conclusions of our article thus partially confirm branded manufacturers' thinking: they may produce store brands when they are not capacity constrained

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Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 09-130.

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Date of creation: Dec 2009
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Publication status: Published in European Review of Agricultural Economics, vol.�39, n°2, 23 mars 2011, p.�213-239.
Handle: RePEc:tse:wpaper:22262
Contact details of provider: Phone: (+33) 5 61 12 86 23
Web page: http://www.tse-fr.eu/

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  1. Bontemps, Christophe & Orozco, Valérie & Réquillart, Vincent, 2008. "Private Labels, National Brands and Food Prices," IDEI Working Papers 402, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. 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.
  3. Staahl Gabrielsen, T. & Sorgard, L., 2000. "Private Labels, Price Rivalry, and Public Policy," Papers 8/00, Norwegian School of Economics and Business Administration-.
  4. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  5. 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.
  6. Mills, David E, 1995. "Why Retailers Sell Private Labels," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(3), pages 509-28, Fall.
  7. 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.
  8. 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.
  9. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
  10. 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.
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