Inference and Impact of Category Captaincy

Category: Marketing Seminar
When: 14 February 2023
, 12:15
 - 13:30
Where: RuW 1.201
Speaker: Assistant Prof. Xinrong Zhu (Imperial College London Business School)


Inference and Impact of Category Captaincy


This paper studies category captaincy, a vertical relationship whereby retailers delegate pricing and assortment decisions of an entire product category to one of the leading manufacturers within the category. These confidential contracts have raised anti-trust concerns; however, empirical analysis has been limited. I develop strategies to infer the prevalence of such contracts and to quantify their impact on prices, market shares, and profits of manufacturers and retailers.  I apply my strategies to the yogurt category, where the captain is either Dannon or Yoplait---the top two national brands. My approach is to first estimate a random-coefficient demand model using Nielsen scanner data. I use estimates of the brand-retailer specific shocks to classify retailers into one of three categories: Dannon-captained retailers, Yoplait-captained retailers, or non-captained retailers.    I then apply conduct tests to infer that captains eliminate double markups from their own products, while the non-captain products still have double markups. My results suggest that about 70% of retailers engage in captaincy arrangements. Finally, counterfactual experiments show that category captaincy relationships increase the market share of the captain by about 50%, but they can also increase retailer profits and consumer welfare by eliminating double markups on the captain’s products.

More information on Xinrong Zhu can be found here.

The Seminar will be held in Seminar Room RuW 1.201 as well as broadcasted via Zoom with the following link:

Meeting-ID: 629 5855 6058
Kenncode: 101686