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ASSESSING THE IMPACT OF RETAILER STORE BRAND PRESENCE ON MANUFACTURER BRANDS IN AN EQUILIBRIUM FRAMEWORK

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  • *We thank the Editor and two anonymous reviewers for comments that improved this paper. The paper also benefited from valuable discussions with Alessandro Bonanno, Jean-Pierre Dubé, Avi Goldfarb, Adam Rabinowitz, Charles Rhodes, Sylvie Tchumtchoua and Gautam Tripathi. Remaining errors are our own.

Abstract

This article assesses the impact of retailer store brand products on manufacturer brand prices, profitability and consumer welfare in Boston's white fluid milk market. Estimates from a random coefficients logit demand model are used to specify and test a set of pricing games. Under the selected model, milk manufacturers are Stackelberg leaders to retailers, and store brand milks are procured by retailers at cost. The model is used to investigate counterfactual markets without retailer store brand milks. Counterfactual Simulation results indicate that store brands increase channel profits, retailer profits and consumer welfare, while having mixed effects on equilibrium retail prices.

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