Optimal production channel for private labels: Too much or too little innovation?
We analyze the impact of the private label production channel on innovation. A retailer may either choose a competitive fringe or rely on a brand manufacturer to produce its private label. The trade-o between the two channels is a choice between too much or too little innovation, i.e. quality investment, on the private label. On the one hand, when choosing the competitive fringe, the retailer over-invests to increase its buyer power. On the other hand, when the brand manufacturer is selected, a hold-up e ect leads to under-investment. In addition, selecting the brand manufacturer may create economies of scale that spur innovation.
|Date of creation:||Apr 2013|
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- Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
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