Explain the pricing strategy being implemented when a retail store places the store's generic brand items next to the national brand items when the national brand items have a slightly higher price than the generic brand item

Why would a retailer do this?

The store is relying on the assimilation effect. A retailer may do this in an attempt to show the consumer that the products are very similar, and then consumers will feel as if they are saving money by purchasing the generic versus the national brand item. Sales of the generic items will likely increase because of their positive association with the brand items and their somewhat lower prices.