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Abstract
Private label products have been studied ex
tensively and theoretical frameworks were
developed to show private label products
lend their retailers
bargaining power over
factory brands. Because of unobservable fact
ory or wholesale prices empirical evidence
has been lacking. This paper, using an
efficient bargaining model in a multilateral
bargaining setup and IRI brand level data, pr
ovides for the first time empirical evidence
supporting the existence of such bargaining power
by retailers with strong private labels.
Estimation results show that the retailers in
the Boston fluid milk market are able to
leverage their private label products to ga
in concessions when negotiating wholesale
prices with two major factory brands. Th
is suggests that the relationship between
retailers and milk processors is competitive
even though the retailers enjoy channel
power.