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Inter-format competition among retailers: The role of private label products in market delineation

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  • Haucap, Justus
  • Heimeshoff, Ulrich
  • Klein, Gordon J.
  • Rickert, Dennis
  • Wey, Christian

Abstract

This paper analyses the extent of inter-format retail competition between supermarkets, discounters and drugstores in Germany, using data from the German market for diapers. We estimate a random coefficient logit model at the individual household level. Based on consumer substitution patterns, we calculate manufacturers' and retailers' estimated marginal costs and margins and, based on these margins, apply standard market delineation techniques which suggest that the strongest substitution patterns are between the leading manufacturer brand and private labels sold at drugstores and discounters. This finding contrasts with recent speculations by competition authorities that private label products may belong to a different antitrust market than manufacturers' brands.

Suggested Citation

  • Haucap, Justus & Heimeshoff, Ulrich & Klein, Gordon J. & Rickert, Dennis & Wey, Christian, 2013. "Inter-format competition among retailers: The role of private label products in market delineation," DICE Discussion Papers 101, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:101
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    3. Hökelekli, Gizem & Lamey, Lien & Verboven, Frank, 2017. "The battle of traditional retailers versus discounters: The role of PL tiers," Journal of Retailing and Consumer Services, Elsevier, vol. 39(C), pages 11-22.
    4. Haucap, Justus & Heimeshoff, Ulrich & Klein, Gordon J. & Rickert, Dennis & Wey, Christian, 2013. "Wettbewerbsprobleme im Lebensmitteleinzelhandel," DICE Ordnungspolitische Perspektiven 48, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    5. Rickert, Dennis, 2016. "Consumer state dependence, switching costs, and forward-looking producers. A dynamic discrete choice model applied to the diaper market," VfS Annual Conference 2016 (Augsburg): Demographic Change 145672, Verein für Socialpolitik / German Economic Association.
    6. Haucap, Justus & Heimeshoff, Ulrich & Klein, Gordon J. & Rickert, Dennis & Wey, Christian, 2013. "Bargaining power in manufacturer-retailer relationships," DICE Discussion Papers 107, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L8 - Industrial Organization - - Industry Studies: Services
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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