Spatial Competition and Private Labels

Abstract

Private labels, also known as store brands, are an important component of competitive strategy among multi-product retailers, as they can increase retailers' power over suppliers in the vertical channel or facilitate horizontal differentiation among retailers. This paper seeks to identify the relative importance of each role, conditional on the location of both private labels and national brands of ice cream in attribute space. We find that retailers' share of the total margin (retail price less production cost) is higher for private labels than national brands when retailers choose to imitate national brands with their own offerings.