Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Bergen, Department of Economics

No 02/12: PRIVATE LABELS, RENT SHIFTING AND CONSUMER WELFARE.

Bjørn Olav Johansen ()
Additional contact information
Bjørn Olav Johansen: University of Bergen, Norway, Postal: Department of Economics, Fosswinckelsgt. 14, 5007 Bergen, Norway

Abstract: This paper investigates a retailer's decision to introduce a private label and asks how the retailer's access to a private label may affect the pricing of substitute national brands. We consider a model with two vertically differentiated national brand manufacturers that negotiate sequentially with a monopolist retailer over two-part tariffs. We find that when the retailer decides to introduce a private label, this generates a price increase for one of the two national brands. Moreover, when we endogenise the order of negotiations, we find that i) the retailer?s private label is always introduced, and ii) the private label always causes a price increase for the high-quality national brand only. In our model, this price increase does not occur due to a price discrimination effect, as in Gabrielsen and Sørgard (2007) ["Private labels, price rivalry, and public policy", European Economic Review, (51), 403-424], but as a result of a rent-shifting effect. The welfare implications of private label introduction are discussed.

Keywords: private labels; national brands; rent shifting; public policy

JEL-codes: L11; L12; L40; L42

65 pages, January 31, 2012

Full text files

WP.02.12.pdf PDF-file Full text

Download statistics

Questions (including download problems) about the papers in this series should be directed to Kjell Erik Lommerud ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2019-05-27 15:19:17.