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Store loyalty, bargaining power and the private label production issue

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  • Fabian Bergès-Sennou

Abstract

One of many explanations offered for the rise of private labels (PLs) is that they increase the bargaining power of the retailer. The prior question of the PL production assignment has not been analysed in an economic framework. The retailer can either entrust the production of his PL to the national brand (NB) manufacturer at a low unit cost, with the disadvantage that both products (NB and PL) are held by the same agent, or he can choose a firm from the competitive fringe with a higher unit production cost. In a framework where loyalty (presence of store-switching and brand-switching consumers) and bargaining strength count, we show that the retailer will assign his PL production to the NB manufacturer when the latter's bargaining power is low. However, a higher consumer loyalty for the NB can reverse the retailer's decision. Copyright 2006, Oxford University Press.

Suggested Citation

  • Fabian Bergès-Sennou, 2006. "Store loyalty, bargaining power and the private label production issue," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 33(3), pages 315-335, September.
    • Handle: RePEc:oup:erevae:v:33:y:2006:i:3:p:315-335
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    Cited by:

    1. Bonnet, Céline & Requillart, Vincent, 2010. "Is The Eu Sugar Policy Reform Likely To Increase Obesity?," 115th Joint EAAE/AAEA Seminar, September 15-17, 2010, Freising-Weihenstephan, Germany 116414, European Association of Agricultural Economists.
    2. Hovhannisyan, Vardges & Stiegert, Kyle W., 2011. "Imperfect Competition between Milk Manufacturers and Retailers in a Midwestern State in the U.S," 2011 Annual Meeting, February 5-8, 2011, Corpus Christi, Texas 98844, Southern Agricultural Economics Association.
    3. Bergès-Sennou, Fabian & Orozco, Valérie, 2010. "Measures of store loyalty in French food retailing," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 91(3).
    4. Tong, Yang & Xiao, Tiaojun, 2024. "National or third-party manufacturer? Sourcing strategy of a dominant platform: Signaling game's perspective," Omega, Elsevier, vol. 124(C).
    5. Bonnet, Céline & Bouamra-Mechemache, Zohra, 2020. "Empirical methodology for the evaluation of collusive behaviour in vertically-related markets: An application to the “yogurt cartel” in France," International Review of Law and Economics, Elsevier, vol. 61(C).
    6. Hovhannisyan, Vardges & Stiegert, Kyle W., 2011. "Vertical Channel Analysis of the U.S. Milk Market," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103631, Agricultural and Applied Economics Association.
    7. Johansen, Bjørn Olav, 2012. "Private Labels, Rent Shifting And Consumer Welfare," Working Papers in Economics 02/12, University of Bergen, Department of Economics.
    8. Shaobo Wu & Shiping Wen & Quan Zhou & Xinghong Qin, 2020. "Coordination of Store Brand Product’s Green Supply Chain Based on Negotiation," Sustainability, MDPI, vol. 12(9), pages 1-25, May.
    9. Stiegert, Kyle W. & Hovhannisyan, Vardges, 2009. "Chapter 7: Food Retailing in the United States: History, Trends, Perspectives," Structural Changes in Food Retailing: Six Country Case Studies 60678, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    10. Iván Valdés de la Fuente & Gonzalo Escobar Elexpuru, 2022. "Is it rational for a large-retailer to sell an own-brand product similar to the branded product of a large manufacturer? A Vertical Product Differentiation Model," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, vol. 90(3), pages 77-109, February.
    11. Bonnet, Céline & Bouamra-Mechemache, Zohra, 2019. ""Yogurt Cartel" of Private Label Providers in France: impact on prices and welfare," TSE Working Papers 19-1012, Toulouse School of Economics (TSE).
    12. Unknown, 2009. "Structural Changes in Food Retailing: Six Country Case Studies," Structural Changes in Food Retailing: Six Country Case Studies 100443, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    13. Guo, Xiaowei & Zha, Yong & Chen, Huaping & Liang, Liang, 2023. "National brand manufacturers’ supply strategy in the presence of retailers’ store-branded lookalike packaging and consumer confusion about quality preference," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 175(C).
    14. Hsiao, Lu & Xiong, Hui, 2022. "Store brand introduction, retail competition and manufacturers’ coping strategies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 165(C).

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