This paper uses an option-pricing model to explore the impact of various fa
ctors on whether and when a retailer will choose to introduce a private lab
el in a product category that is currently the exclusive domain of a manufa
cturer. Among the factors considered are the retailer's and manufacturer's
margins, the cost of introducing the private label, the shelf space to be d
evoted to the private label and by consequence the store-market share to be
captured by it, and the quality of the private label.