NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

What Can the Price Gap between Branded and Private Label Products Tell Us about Markups?

Robert Barsky, Mark Bergen, Shantanu Dutta, Daniel Levy

NBER Working Paper No. 8426
Issued in August 2001
NBER Program(s):   EFG   ME

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 is an upper bound on the retailer's marginal handling cost for both the brand and private label versions. We find that lower bounds on the 'full' markup ratio range from 3.44 for toothbrushes and 2.23 for soft drinks to about 1.15-1.20 for canned tuna and frozen entrees, with the majority of categories falling in the range 1.40-2.10. Lower bounds on manufacturers' markups are even higher. Thus the data indicate that markups on nationally branded products sold in U.S. supermarkets are large.

download in pdf format
   (284 K)

email paper

This paper is available as PDF (284 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w8426

Published: What Can the Price Gap between Branded and Private-Label Products Tell Us about Markups? , Robert B. Barsky, Mark Bergen, Shantanu Dutta, Daniel Levy. in Scanner Data and Price Indexes, Feenstra and Shapiro. 2003

Users who downloaded this paper also downloaded these:
Barsky, Bergen, Dutta, and Levy What Can the Price Gap between Branded and Private-Label Products Tell Us about Markups?
Scott Morton and Zettelmeyer w7712 The Strategic Positioning of Store Brands in Retailer - Manufacturer Bargaining
Nekarda and Ramey w19099 The Cyclical Behavior of the Price-Cost Markup
Chevalier, Kashyap, and Rossi w7981 Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data
Waldfogel and Chen w9942 Does Information Undermine Brand? Information Intermediary Use and Preference for Branded Web Retailers
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us