A ban on input price discrimination directly impacts suppliers who sell through competing retailers (e.g. national brand suppliers) but only indirectly those who sell through one exclusive retailer (e.g. private label suppliers). In a secret contracting environment, we show that, because of opportunism, removing a ban on input price discrimination reduces the retail price of the national brands. In contrast, removing the ban on input prices has an ambiguous impact, though more limited, on the retail prices of private labels. A reform authorizing input price discrimination took place in France in 2008 and our paper uses this natural experiment to test our predictions. Using a consumer panel dataset of food prices in France over the period 2006-2010, we run a difference-in-differences analysis and show that on average the reform has led to a decrease in prices of national brands by 3,36% compared to private labels.
Keywords: Intermediate Price Discrimination, Policy Evaluation, Food sector.
JEL Classification: K21, L13, L42, L66, L81.