Manager Sophie Yang Authors Chapter on Competition between Premium and Value Brands
July 31, 2015
Research by Analysis Group Manager Sophie Yang on the effects of competition between premium and value brands was recently published as a chapter in the book Brands, Competition Law and IP (Cambridge University Press, July 2015). The book features insights on legal issues surrounding brands, and integrates perspectives from both antitrust and intellectual property law in Europe and the United States.
In the chapter "Bayer or Walgreen's? The Relationship of Premium and Value Brands in the United States," Dr. Yang and coauthors studied the competition impacts that premium and value brands have on one another, and outlined several implications this competition has on pricing, promotion, and market definition. In the study, the authors reviewed existing research on the subject, and analyzed the interactions of brands using store-level scanner data from a large retail chain. The researchers estimated own- and cross-price elasticities between premium and value brands of bathroom tissues, as well as the impact of promotions on competitor sales, and found that premium brands are more price sensitive than value brands, but that "the value brand should avoid engaging in 'price wars' with premium brands by substantially increasing their discount. This is because a reduction in a value brand's price may not be able to steal sales from the premium brands and increase the value brand's sales significantly."
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