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Price and Brand Competition between Differentiated Retailers: A Structural Econometric Model

Dubois, Pierre and Jodar-Rosell, Sandra (2010) Price and Brand Competition between Differentiated Retailers: A Structural Econometric Model. TSE Working Paper, n. 10-159

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We develop a model of competition between retailer chains with a structural estimation of
the demand and supply in the supermarket industry in France. In the model, supermarkets
compete in price and brand offer over all food products to attract consumers, in particular
through the share of private labels versus national brands across all their products. Private
labels can serve as a differentiation tool for the retailers in order to soften price competition.
They may affect the marginal costs of all products for the retailer because of eventual quality
differences and also by helping retailers to obtain better conditions from their manufacturers.
Differentiation is taken into account by estimating a discrete-continuous choice model of
demand where outlet choice and total expenditures are determined endogenously. On the
supply side, we consider a simultaneous competition game in brand offer and price between
retailers to identify marginal costs. After estimation by simulated maximum likelihood,
the structural estimates allow to simulate the effect on the equilibrium behavior of retailer
chains of a demand shock through an increase in transportation costs for consumers and a
merger between two retailer chains.

Item Type: Monograph (Working Paper)
Language: English
Date: April 2010
JEL Classification: L13 - Oligopoly and Other Imperfect Markets
L22 - Firm Organization and Market Structure - Markets vs. Hierarchies; Vertical Integration; Conglomerates; Subsidiaries
L81 - Retail and Wholesale Trade; Warehousing; e-Commerce
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 18 Jan 2012 06:02
Last Modified: 02 Apr 2021 15:36
OAI Identifier:

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