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Abstract

Recent studies on private labels find that store brand consumers tend to be middle income, educated, older consumers with large families. Moreover, low-income households that have the same needs as wealthier households do not economize by buying a greater proportion of private-label products. Instead they prefer higher priced national brands even in recessionary times. In this research study we employ the reference group theory to explain this counterintuitive phenomenon. Results show that low-income households are upward comparing, that is, they contrast themselves with high-income households whom they believe are better-off. These comparisons result in preference for national brands. In addition, we find that low income consumers know little about advances in private labels which also explains why they prefer national brands. Last, we find that our results are also consistent in emerging economies.

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