Quality Choices in a Vertical Structure: National Brands vs Private Labels in Grocery Retailing

The paper analyzes quality choices in a vertical structure involving a monopolist food manufacturer (national brand-NB producer) and a monopolist retailer supplying both the national brand as well as a private label (PL). The analysis is based on a three-stage dynamic game. According to the results, in the Nash equilibrium the two players choose the maximum possible qualities for their products. This means that the NB food manufacturer seeks the maximum product differentiation, while the LP retailer seeks the minimum product differentiation. The behavior of the two players appears to be consistent with actual developments in the food markets as well as with earlier empirical studies documenting the efforts of NB food manufacturers to increase product differentiation.


Issue Date:
2012
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/163328
Published in:
Agricultural Economics Review, Volume 11, Issue 2
Page range:
34-43
Total Pages:
10




 Record created 2017-04-01, last modified 2017-08-27

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