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The Impact of Retail Store Brands on Manufacturer Brands: A Generalization of Steiner’s Elasticity Model

  • Michael Cohen

    ()

    (New York University)

  • Ronald W. Cotterill

    ()

    (University of Connecticut)

Store brands are thought to improve a retailer's position relative to leading brand manufacturers and to reduce retail prices. Steiner (2004) o ers a characterization of typical industry structures by considering the relationship between interbrand and intrabrand elasticities. We estimate a model of demand and use elasticity estimates to characterize Boston's uid milk market as falling into one of Steiner's \typical industry structures". In addition to investigating the relationship between interbrand and intrabrand elasticities we derive and test structural models of supply channel conduct that explicitly identify the pricing conduct that is implicit in Steiner's \typical industry structures". Using scanner data for brand level milk sales milk sales at leading retail chains in Boston we show that store brands do in fact improve the pro t position of retailer vis a vis the manufacturer, reduce retail prices, and improve total welfare in the market.

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File URL: http://fmpc.uconn.edu/publications/rr/rr110.pdf
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Paper provided by University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy in its series Food Marketing Policy Center Research Reports with number 110.

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Length: 38 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:zwi:fpcrep:110
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  1. Aviv Nevo, 1998. "Measuring Market Power in the Ready-to-Eat Cereal Industry," NBER Working Papers 6387, National Bureau of Economic Research, Inc.
  2. Ward S. Bowman & Jr., 1952. "Resale Price Maintenance-A Monopoly Problem," The Journal of Business, University of Chicago Press, vol. 25, pages 141.
  3. Villas-Boas, Sofia B., 2006. "Vertical relationships between manufacturers and retailers: inference with limited data," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt0z26d2v9, Department of Agricultural & Resource Economics, UC Berkeley.
  4. Mills, David E, 1995. "Why Retailers Sell Private Labels," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(3), pages 509-28, Fall.
  5. Corts, Kenneth S., 1998. "Conduct parameters and the measurement of market power," Journal of Econometrics, Elsevier, vol. 88(2), pages 227-250, November.
  6. Jagmohan S. Raju & Raj Sethuraman & Sanjay K. Dhar, 1995. "The Introduction and Performance of Store Brands," Management Science, INFORMS, vol. 41(6), pages 957-978, June.
  7. Smith, Richard J, 1992. "Non-nested.Tests for Competing Models Estimated by Generalized Method of Moments," Econometrica, Econometric Society, vol. 60(4), pages 973-80, July.
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