TY - JOUR AU - Barsky,Robert AU - Bergen,Mark AU - Dutta,Shantanu AU - Levy,Daniel TI - What Can the Price Gap between Branded and Private Label Products Tell Us about Markups? JF - National Bureau of Economic Research Working Paper Series VL - No. 8426 PY - 2001 Y2 - August 2001 UR - http://www.nber.org/papers/w8426 L1 - http://www.nber.org/papers/w8426.pdf N1 - Author contact info: Robert B. Barsky Department of Economics University of Michigan Ann Arbor, MI 48109-1220 Tel: 734/764-9476 Fax: 734/764-2769 E-Mail: barsky@umich.edu Mark Bergen Marketing/Logistics Management Carlson School of Management University of Minnesota 321 19th Avenue Minneapolis, MN 55455 Tel: 612/624-1821 E-Mail: berge039@umn.edu Shantanu Dutta E-Mail: sduttabd@yahoo.com Daniel Levy Department of Economics Bar-Ilan University Ramat-Gan 52900 ISRAEL Tel: 972-3-531-8331 Fax: 972-3-535-3180 E-Mail: Daniel.Levy@biu.ac.il M1 - published as Robert B. Barsky, Mark Bergen, Shantanu Dutta, Daniel Levy. "What Can the Price Gap between Branded and Private-Label Products Tell Us about Markups? ," in Robert C. Feenstra and Matthew D. Shapiro, editors, "Scanner Data and Price Indexes" University of Chicago Press (2003) AB - 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. ER -