Retailer private brand introduction decisions in the presence of manufacturer information disclosure

In the current dual-channel structure whereby manufacturers sell both via retailers and their own direct online channel, retailers may introduce private brands (PBs) to compete with manufacturers’ products. With this in mind, manufacturers, better informed about product quality, carefully assess the potential impact of disclosing information on product quality through wholesale pricing and retailers’ incentives to introduce PBs. Using a two-stage game model, we show that manufacturers may strategically disclose low product quality to shift demand toward their direct channel, particularly when market demand is weak or PBs are introduced. However, PB introduction is not always profitable, as it depends on demand conditions and cost considerations. Surprisingly, we find that manufacturers’ disclosure strategies can deter retailers from launching PBs, even when product quality is fully disclosed. These findings reveal the complexities of dual-channel competition and offer insights into supply chain strategies.