A Socioeconomic Approach to Assessing Price Competition between Private Labels and National Brands: The Case of Shredded Cheese

An LA/AIDS model is developed to estimate demand elasticities for packages of 8-oz shredded cheese for higherand lower-income consumers. Data used in this study are scanner data for six supermarket stores in two distinct socioeconomic areas. Results show that: (1) lower-income shoppers are more price-sensitive than higher-income shoppers for both private labels and national brands; (2) compared with private labels, consumers are very sensitive to national brands price changes even in higher-income areas; (3) cross-price elasticities between private labels and national brands are all positive, i.e., private labels and national brands are substitutes in both lowerand higherincome stores; and (4) the number of promoted items does not have a statistically significant impact on sales; instead, the percentage of price discount affects sales for both private labels and national brands.