IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Determining the Impact of Retailer Store Brand Procurement on Vertical Relationships with Brand Manufacturers and on Market Equilibrium

Listed author(s):
  • Michael Cohen


    (New York University)

Registered author(s):

    This paper investigates how a retailer's store brand supply source impacts vertical pricing and supply channel pro tability. Using chain-level retail scanner data from major supermarkets in Boston prior to the leading retailer's divestiture of its store brand milk processing to a major brand manufacturer I estimate a random coecients logit demand model employing a Bayesian estimation approach. Bayesian decision theory is applied to select from a set of pricing games the one most likely for the data sample analyzed. Results from this analysis indicate that the empirically valid model has the pre-divested retailer integrated into the processing of its own milk and takes as given the wholesale price of brand milks while competing retailers have nonlinear pricing contracts with brand manufacturers who produce their store brands. This model is matched against a series of counterfactual simulations as a baseline. The counterfactual simulations consider the eventual divestiture of store brand milk processing by the leading retailer to a major brand manufacturer as well as two ctional markets where store brands are no longer offered and optimal nonlinear pricing breaks down making way for a double marginalization outcome. Simulation results indicate that the divesture likely improved pro tability and reduced retail prices by eliminating double marginalization.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    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 122.

    in new window

    Length: 36 pages
    Date of creation: Jan 2010
    Handle: RePEc:zwi:fpcrep:122
    Contact details of provider: Postal:
    1376 Storrs Road, U-21, Storrs, Connecticut 06269-4021

    Phone: 860-486-2836
    Fax: 860-486-1932
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:zwi:fpcrep:122. 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: ()

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.