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Strategic Effects of Private Labels and Horizontal Integration

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Why would retailers want to introduce private labels in a given product category? This paper examines this question, focusing especially on the effects of the emergence of private labels on the relative power of retailers vis à vis national brand manufacturers. The analysis allows for different degrees of competition in the vertical structure, and for linear and non-linear pricing. We show that retailers' gains from introducing private labels increase with the concentration of the retail market both with linear and non-linear pricing.
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Keywords: Retailers; competition; grocery; manufacturers; power; private labels; strategic effects

Document Type: Research Article

Publication date: 2004-07-01

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