Private label products as experience goods

Abstract

Food retailing has become more concentrated and private label goods have spread over the last 40 years. Using a two-stage model in which consumers become informed about the quality of the good only in period 2, we examine what determines the presence or absence of private label experience goods in supermarkets. Our most novel result is that in the case of products purchased infrequently, producing a reputable private label is not sustainable. Retailer bargaining power increases the likelihood of a private label good being produced. Evidence from France is consistent with the main propositions