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

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  • Fousekis, Panos

Abstract

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.

Suggested Citation

  • Fousekis, Panos, 2012. "Quality Choices in a Vertical Structure: National Brands vs Private Labels in Grocery Retailing," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 11(2), pages 1-10.
    • Handle: RePEc:ags:aergaa:163328
    DOI: 10.22004/ag.econ.163328
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    References listed on IDEAS

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    1. Bontemps Christophe & Orozco Valerie & Réquillart Vincent & Trevisiol Audrey, 2005. "Price Effects of Private Label Development," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 3(1), pages 1-18, February.
    2. Bontems, Philippe & Monier-Dilhan, Sylvette & Requillart, Vincent, 1999. "Strategic Effects of Private Labels," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 26(2), pages 147-165, June.
    3. Jagmohan S. Raju & Raj Sethuraman & Sanjay K. Dhar, 1995. "The Introduction and Performance of Store Brands," Management Science, INFORMS, vol. 41(6), pages 957-978, June.
    4. Avenel, E. & Caprice, S., 2006. "Upstream market power and product line differentiation in retailing," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 319-334, March.
    5. Mills, David E, 1999. "Private Labels and Manufacturer Counterstrategies," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 26(2), pages 125-145, June.
    6. Bergès-Sennou Fabian & Bontems Philippe & Réquillart Vincent, 2004. "Economics of Private Labels: A Survey of Literature," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 2(1), pages 1-25, February.
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    Cited by:

    1. Xin Su & Haolong Liu & Shunqi Hou, 2018. "The Trilateral Evolutionary Game of Agri-Food Quality in Farmer-Supermarket Direct Purchase: A Simulation Approach," Complexity, Hindawi, vol. 2018, pages 1-11, February.
    2. Bo Liao & Candace A. Yano & Minakshi Trivedi, 2020. "Optimizing Store‐Brand Quality: Impact of Choice of Producer and Channel Price Leadership," Production and Operations Management, Production and Operations Management Society, vol. 29(1), pages 118-137, January.
    3. Zheng, Hong & Wu, Huamin & Tian, Lin, 2022. "Healthcare service enhancement with patient search," Journal of Business Research, Elsevier, vol. 152(C), pages 398-409.
    4. Paul W. Dobson & Ratula Chakraborty, 2014. "How Do National Brands And Store Brands Compete?," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2014-07, Centre for Competition Policy, University of East Anglia, Norwich, UK..

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    More about this item

    Keywords

    Agricultural and Food Policy;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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