The Impact of Retail Store Brands on Manufacturer Brands: A Generalization of Steiner’s Elasticity Model

Store brands are thought to improve a retailer's position relative to leading brand manufacturers and to reduce retail prices. Steiner (2004) offers a characterization of typical industry structures by considering the relationship between interbrand and intrabrand elasticities. We estimate a model of demand and use elasticity estimates to characterize Boston's fluid milk market as falling into one of Steiner's "typical industry structures". In addition to investigating the relationship between interbrand and intrabrand elasticities we derive and test structural models of supply channel conduct that explicitly identify the pricing conduct that is implicit in Steiner's "typical industry structures". Using scanner data for brand level milk sales milk sales at leading retail chains in Boston we show that store brands do in fact improve the profit position of retailer vis a vis the manufacturer, reduce retail prices, and improve total welfare in the market.