Private Labels, Price Rivalry, and Public Policy¤

The article examines how the existence of a retailer owned brand, private label, a¤ects the price setting of a national brand. We ...nd that the potential for a private label introduction may lead to price concessions from the national brand producer, but that actual private label introduction as such may very well lead to higher retail prices on national brands. We argue that this may have important implications for the interpretation of empirical results and the public policy towards national brands. JEL classi...cation: L12, L40. ¤We are indebted to Zhiqi Chen, Greg Sha¤er and seminar participants at the Canadian Economics Association annual meeting in Vancouver in June 2000 and the conference ’industrial organization and the food processing industry’ in Toulouse in June 2000 for helpful comments. This article was partly written while the authors were visiting the University of California Santa Barbara, whose hospitality is gratefully acknowledged. We thank the Norwegian Research Council for ...nancial support (the program ’Naering, Finans og Marked’) through the Foundation for Research in Economics and Business Administration. Sørgard also thanks the Norwegian Research Council and the U.S.-Norway Fulbright Foundation for Educational Exchange for travel grants.