We develop a model of vertical relations between national brand and private label producers and competing multi-product retailers to derive new predictions on the impact of input price discrimination on retail prices. A reform that rescinded a ban on input price discrimination in France provides a natural experiment to test these predictions. Using household scanner data on food prices, we run a difference-in-differences analysis and show that the reform caused a significant decrease of the relative prices of national brand products. These results suggest a pro-competitive effect of authorizing input price discrimination.
Keywords: Intermediate Price Discrimination, Policy Evaluation, Food sector.
JEL Classification: K21, L13, L42, L66, L81.