Brand name and private label price setting by a monopoly store

A monopoly that sells to brand-name loyal customers and to price-sensitive customers must decide whether to carry both name-brand and private-label products and how much to charge. The monopoly may charge either more or less for the brand name if it carries a private label, and the price differential between the products is sensitive to cost and taste parameters.

► Selling a private label may raise or lower a store's brand-name price. ► The greater the number of price-sensitive consumers, the more likely a store carries a private label. ► A higher reservation price may cause a private label-brand price difference to fall. ► A higher reservation price may cause a store to drop a private label. ► A brand price may be higher with price-sensitive than just brand-loyal customers.