A Study of Vertical Integration and Vertical Divestiture: The Case of Store Brand Milk Sourcing in Boston. Issue 1 (9th January 2013)

• Record Type: Journal Article
• Authors: Cohen, Michael A.
• Is Part Of: Journal of economics & management strategy. Volume 22:Issue 1(2013)
• Page Start: 101
• Page End: 124
• Publication Date: 2013-01-09
• Subjects: Economics -- Periodicals; Business -- Periodicals; Management -- Periodicals; Strategic planning -- Periodicals; 330.1
• DOI: 10.1111/jems.12002
• Languages: English
• ISSNs: 1058-6407

Abstract

<abstract abstract-type="main" xml:lang="en"> <title> <x xml:space="preserve">Abstract</x> </title> <p> <italic>This article investigates whether a retailer's store brand supply source impacts vertical pricing and supply channel profitability. Using chain‐level retail scanner data, a random coefficients logit demand model is estimated employing a Bayesian estimation approach. Supply models are specified conditional on demand parameter estimates. Bayesian decision theory is applied to select the best fitting pricing model. Results indicate that a vertically integrated retailer engages in linear pricing for brand manufacturers' products while competing retailers make nonlinear pricing contracts with brand manufacturers for branded products and store brands. A simulated vertical divestiture based on real world events provides evidence for improved channel efficiency.</italic> </p> </abstract>