Abstract
Purpose - This paper seeks to provide a practical methodology for a retailer's pricing decisions for a store brand in relation to the corresponding national brand's price.
Design/methodology/approach - Demand functions for the national and store brands are derived by mixing two consumer heterogeneity distributions: reservation price and quality-price trade-off. Unlike the existing theoretical models, a flexible gamma distribution is employed for practicality. A numerical approach is proposed for finding an optimal price for the store brand.
Findings - The proposed methodology is flexible and computationally straightforward, and is based on economic models. Instead of deriving generalized theories, however, a numerical approach using survey data is developed for more practicality.
Practical implications - The proposed methodology allows managers to find the optimal price for a store brand using survey data.
Originality/value - The proposed methodology overcomes the limitations of the existing methodologies, i.e. the discontinuous nature of the conjoint analysis-based approach and the theoretical nature of the economic model approach.