Should national brand manufacturers produce private labels? Anecdotal evidence shows that this is a common question for managers in different industries and countries. This paper examines this question, focusing especially on the effects of producing private labels on manufacturers´ profits when their provision may affect both the consumers´ perception of the quality of the private label and the national brand manufacturer’s costs. The analysis allows for different degrees of competition in the retail market, and for linear and non-linear pricing. We show that national brand manufacturer’ gains from producing private labels are increasing with the concentration of the retail market. The results presented in this paper may help managers to identify key variables that may affect the profitability of producing private labels.
Should National Brand Manufacturers Produce Private Labels?Published by:
Journal of Modeling in Management. Vol. 2 N° 1, 2007.