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Abstract

This paper investigates the impacts of store brands (i.e., private labels) and retail characteristics (scanners, deli, bakery, and pharmacy departments, ATMs, restaurant and store size) on fluid milk prices using 1,740 supermarket-level observations from four cities. Non-parametric results reveal that although private label milk initially exerts a procompetitive effect on milk prices, eventually the effect is to raise the prices of both manufacturers' brands and private labels. Econometric results further reveal that price differentials are larger for reduced-fat milk than for whole milk and that the more enhanced the retail configuration is, the higher milk prices are. Overall, the results attest to some degree of price discrimination by retailers through controlling the brand of milk sold and providing one-stop shopping convenience.

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