In a secret contracting environment, economic theory mainly shows that banning
wholesale price discrimination may, by solving opportunism, increase prices
and lower welfare. We build an original model that shows how such a ban is likely
to affect differently the prices of national brands and that of private labels which
coexist in the retailers’ shelves: a ban would directly raise the prices of national
brand products, but it would impact the prices of private labels to a lower extent,
because they are often produced by dedicated manufacturers which were not in
a position to discriminate before the ban. A reform authorizing wholesale price
discrimination took place in France in 2008 and our paper uses this natural experiment
to test our result. Using a consumer panel dataset of food prices in France
over the period 2006-2010 and using a difference-in-differences analysis, we show
that on average the reform has led to a decrease in prices of national brands by
2.33% compared to private labels.
Keywords: Intermediate Price Discrimination, Retail sector.
JEL Classification: K21, L13, L42, L66, L81.