We study the relationships between national brand prices and the development of private labels, using home-scanned data from a consumer survey reporting purchases for 218 food products. When the impact of private label development is significant (116 cases out of 218), we observe a positive correlation (89%) between brand price and purchases of private labels. When controlling for changes in product quality, we still find a positive relation between private label development and national brand prices. Thus, the change in the national brand product characteristics only partly explains the increase in the national brand prices. Furthermore, the price reactions of national brands differ according to the type of private labels they face. Finally, we demonstrate that the development of private labels has less effect on the prices of second-tier brands than on the prices of the leading brand.
Review of Industrial Organization – Springer Journals
Published: Aug 3, 2008
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