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Wholesale Pricing with Asymmetric Information About the Quality of a Private Label

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  • Johannes Paha

    (Hohenheim University
    Justus-Liebig-University
    Stellenbosch University)

Abstract

This article derives the optimal wholesale tariff that is proposed by the monopolistic manufacturer of a branded product to a monopolistic retailer if the retailer also sells a private label whose quality is unobserved by the brand manufacturer. The focus is on market-share contracts where the manufacturer controls the quantities of both products. To learn the quality of the private label and diminish the retailer’s information rent, it distorts the quantity of the branded product downwards and that of the private label upwards. The manufacturer can control the quantity of the private label if it combines an excess payment with an end-of-year repayment.

Suggested Citation

  • Johannes Paha, 2025. "Wholesale Pricing with Asymmetric Information About the Quality of a Private Label," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 66(1), pages 71-88, January.
    • Handle: RePEc:kap:revind:v:66:y:2025:i:1:d:10.1007_s11151-024-09983-9
    DOI: 10.1007/s11151-024-09983-9
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    More about this item

    Keywords

    Asymmetric information; Branded product; Market-share contract; Mechanism design; Private label product;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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