Discount Chains and Brand Policy

Retail chains are observed in many industries. The question addressed here is whether retail chains can exploit buyer power by excluding some brands. In a theoretical model with two differentiated producers and a single retailer, we show that a retailer will require exclusivity (exclude a brand) if the brands are sufficiently symmetric in demand potential. Exclusivity will increase welfare if the excluded brand is a close substitute for the brand carried by the retailer. Our theoretical results are also set in relation to some findings from the Norwegian grocery industry.
JEL Classification : L 12; L 42