Private Labels and Retailer Profitability: Bilateral Bargaining in the Grocery Channel

Ellickson, Paul B.; Kong, Pianpian; Lovett, Mitchell J.

doi:10.2139/ssrn.3045372

Cited by 15 publications

(16 citation statements)

References 38 publications

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“…More generally, if these assumptions are not satisfied, then the entire supply model is not likely to be identified. Intuitively, each of these assumptions is reasonable, and they are well supported by the empirical literature on vertical supply relationships (Misra and Mohanty 2008; Draganska, Klapper, and Villas‐Boas 2010; Bonnet and Bouamra‐Mechemache 2016; Ellickson, Kong, and Lovett 2018).…”

Section: Data and Identification Strategymentioning

confidence: 65%

“…We capture consumer demand using a discrete choice model. On the supply side, our maintained assumption is that retailers and manufacturers negotiate over wholesale prices one‐on‐one, and our model capturers their negotiation process via a Nash‐in‐Nash bargaining game (Draganska, Klapper, and Villas‐Boas 2010; Meza and Sudhir 2010; Bonnet and Bouamra‐Mechemache 2016; Ellickson, Kong, and Lovett 2018). Consequently, the supply model is correctly specified under the assumption of open negotiation.…”

Section: Modelmentioning

confidence: 99%

“…We follow earlier research in the empirical Nash bargaining literature in establishing the fact that the bargaining power parameter, λ is identified (Misra and Mohanty 2008; Draganska, Klapper, and Villas‐Boas 2010; Bonnet and Bouamra‐Mechemache 2016; Ellickson, Kong, and Lovett 2018). Namely, consider that the supply is a linear combination of our demand estimates and cost shifters.…”

Section: Data and Identification Strategymentioning

confidence: 99%

“…Structural models of vertical relationships between retailers and manufacturers are a relatively well‐understood way of estimating wholesale prices, marginal production costs, and the division of surplus between manufacturers and retailers. Assuming Bertrand‐Nash rivalry among downstream retailers, the solution to the Nash bargaining problem between retailers and manufacturers yields a single parameter that describes the share of the total margin that is appropriated by either the manufacturer or the retailer, depending on the relative bargaining strength of either party (Misra and Mohanty 2008; Draganska, Klapper, and Villas‐Boas 2010; Meza and Sudhir 2010; Crawford and Yurukoglu 2012; Bonnet and Bouamra‐Mechemache 2016; Ellickson, Kong, and Lovett 2018).…”

mentioning

confidence: 99%

“…Second, others estimate bargaining power in a vertical framework similar to ours (Draganska, Klapper, and Villas‐Boas 2010; Bonnet and Bouamra‐Mechemache 2016; Ellickson, Kong, and Lovett 2018), but without observing wholesale prices, they are left to examine wholesale prices from the structure of the bargaining solution. Instead, we are able to directly compare observed wholesale prices to those implied by the structure of the game.…”

mentioning

confidence: 99%

See 4 more Smart Citations

The Robinson–Patman Act and Vertical Relationships

Yonezawa¹,

Gómez²,

Richards³

2019

American J Agri Economics

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Bargaining between consumer-product manufacturers and their retail customers is at least nominally constrained by the prohibitions on price discrimination of the Robinson-Patman Act (RPA) of 1936. However, because the RPA is generally regarded as being inconsistent with the anti-trust principle of protecting consumers, it is not often enforced by the Federal Trade Commission or the Anti-trust Division of the Department of Justice. Because of the perceived ineffectiveness of the RPA, it is unclear whether manufacturers follow the letter of the law, or actively bargain with their downstream customers. In this paper, we use data on wholesale and retail prices for yogurt products, and a Nash-in-Nash vertical bargaining model, to test whether the RPA represents a real constraint on bargaining between manufacturers and retailers. We find that this is not the case, and that vertical markets for consumer goods are more accurately characterized as bargaining-markets than markets regulated by the RPA. Further, we demonstrate that strict enforcement of the RPA would improve social welfare, but would not protect weak retailers.

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Section: Data and Identification Strategymentioning

confidence: 65%

Section: Modelmentioning

confidence: 99%

Section: Data and Identification Strategymentioning

confidence: 99%

mentioning

confidence: 99%

mentioning

confidence: 99%

See 3 more Smart Citations

The Robinson–Patman Act and Vertical Relationships

Yonezawa¹,

Gómez²,

Richards³

2019

American J Agri Economics

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Empirical Models of Bargaining with Externalities in IO and Trade

Yürükoğlu

2022

Bargaining

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National brands in hard discounters: market expansion and bargaining power effects

Bonnet

Bouamra‐Mechemache

Klein

2022

European Review of Agricultural Economics

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In this paper, we analyse the strategic role of the recent introduction of national brand (NB) products by hard discounters (HDs) in the French food retailing market and its impact both at the retail and manufacturer levels. We use a structural econometric model of vertical relationships and consider the competition between mainstream retailers (MSRs) and HDs, and between NBs and private labels (PLs). We apply this model to the French dairy dessert market, which is characterised by a high penetration of PLs and a high concentration at the manufacturer and retail levels. Using a counterfactual analysis, we show that the introduction of NBs by HDs clearly increases hard discounters’ profits. Consumers benefit from this strategy. Moreover, we find an increase in the profit of manufacturers of NBs but at the expense of MSRs. We also show that the introduction of NBs by HDs does not only act as a means to attract different consumer groups and extend their market share through a variety effect. It also serves to improve their bargaining position with respect to their PL providers.

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Private Labels and Retailer Profitability: Bilateral Bargaining in the Grocery Channel

Cited by 15 publications

References 38 publications

The Robinson–Patman Act and Vertical Relationships

The Robinson–Patman Act and Vertical Relationships

Empirical Models of Bargaining with Externalities in IO and Trade

National brands in hard discounters: market expansion and bargaining power effects

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