This paper interprets private label marketing as a retailer instrument for overcoming the double‐marginalization problem inherent in the distribution of well‐known manufacturer brands. Retailers with some degree of market power carry private label substitutes for popular national brands in order to capture more profit from the vertical structures they share with brand manufacturers. The net effect of private label marketing is to improve the performance of distribution channels. After presenting a formal model and deriving analytical results, the paper gathers some empirical evidence that supports these results.

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Abba Lerner's paper in the Review of Economic Studies (1934) is the source of what is now referred to as the Lerner Index of monopoly power. The Lerner Index has become the standard measure of monopoly power and one of the most widely cited indexes in the discipline of economics. This paper traces the origins of the index, sets out its strengths and weaknesses, and examines its role in antitrust enforcement. The Index is a better indicator of a firm's price-setting discretion than its ability to sustain monopoly prices.

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