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Abstract

This article focus on the question that whether private labels are competing along with their retailers’ characteristics and its impacts on retailers’ pricing strategies as well as bargaining power. We differentiate private labels with different retailers and estimate consumer demand and the supply of private labels using BLP (Berry, Levinsohn, and Pakes, 1995) model with monthly-county level data of fluid milk market data in Connecticut. We classify the retailers into regional retailers and national retailers and conduct counterfactual exercises showing retailers pricing strategies to private labels and national brands. Preliminary results indicate consumers like to substitute national retailers’ private labels with regional retailers’ private labels, reflecting the existence of competition. Moreover, with estimated supply model, national retailers have less wholesale prices while regional retailers have potential bargaining power to manufactures when they adjust their private label prices.

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