NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Daniel Levy

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Working Papers

August 2001What Can the Price Gap between Branded and Private Label Products Tell Us about Markups?
with Robert Barsky, Mark Bergen, Shantanu Dutta: w8426
In this paper we investigate the size of markups for nationally branded products sold in the U.S. retail grocery industry. Using scanner data from a large Midwestern supermarket chain, we compute several measures of upper and lower bounds on markup ratios for over 230 nationally branded products in 19 categories. Our method is based on the insight that retail and wholesale prices of private label products provide information on marginal costs that are also applicable to the appropriately matched nationally branded products. Under reasonable assumptions - the accuracy of which we consider in some detail - the wholesale price of a private label product is an upper bound for the marginal manufacturing cost of its nationally branded equivalent, while the retailer's margin on the national brand...

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