Optimal retail pricing of a store brand

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....