The Economics of Slotting Contracts

Klein, Benjamin; Wright, Joshua D.

doi:10.1086/524125

Cited by 89 publications

(54 citation statements)

References 19 publications

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“…These results can be proved by di¤erentiating (13) and (14) with respect to n and taking into account ; 2 (0; 1) as well as n 1.…”

Section: Short-term Contractsmentioning

confidence: 90%

“…The analysis is further simpli…ed by the assumption of no renegotiations if n = N holds. 8 Starting with the case n = N , where outside suppliers are lacking for immediate replacement in the case of negotiation breakdown, the upfront payment G i of supplier i is determined by (see (13) and (14)):…”

Section: Long-term Contractsmentioning

confidence: 99%

“…2 Both the trade press as well as the academic literature have documented a shift of relative bargaining power in the grocery channel in favor of retailers (see Lariviere andPadmanabhan 1997, Sullivan 1997). 3 A survey on the actual debate on slotting allowances is provided by Klein and Wright (2007). 4 See OECD (1998), EU (1999), and FTC (2001,2003) for a discussion.…”

Section: Introductionmentioning

confidence: 99%

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Upfront Payments and Listing Decisions

Baake

Schlippenbach

2008

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe analyze the listing decisions of a retailer who may ask her suppliers to make upfront payments in order to be listed. We consider a sequential game with upfront payments being negotiated before short-term delivery contracts. We show that the retailer is more likely to use upfront payments the higher her bargaining power and the higher the number of potential suppliers. Upfront payments tend to lower the number of products o¤ered by the retailer when the products are rather close substitutes. However, upfront payments can increase social welfare if they ameliorate ine¢ cient listing decisions implied by short-term contracts only. JEL-Classi…cation: L14, L42

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“…These results can be proved by di¤erentiating (13) and (14) with respect to n and taking into account ; 2 (0; 1) as well as n 1.…”

Section: Short-term Contractsmentioning

confidence: 90%

Section: Long-term Contractsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Upfront Payments and Listing Decisions

Baake

Schlippenbach

2008

SSRN Journal

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“…As opposed to supermarkets, Wal-Mart does not have any slotting fees or hidden allowances (Walton, 2005); instead it receives lower wholesale price as a compensation for shelf space (Klein and Wright, 2007 …”

Section: Reasonable Discount Rate For Wal-martmentioning

confidence: 99%

Buyer Market Power and Vertically Differentiated Retailers

2010

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Abstract:We consider a model of vertical competition where downstream firms (retailers) purchase an upstream input from a monopolist and are able to differentiate from each other in terms of quality. Our primary focus is to study the effects of introducing a large retailer, such as a WalMart Supercenter, that is able to lower wholesale prices (i.e. buyer market power). We obtain two main results. First, the store with no buyer market power responds to the presence of the large retailer by increasing its quality, a finding that is consistent with recent efforts by traditional retailers to enhance shoppers' buying experience (i.e. quality). Second, the presence of a large retailer causes consumer welfare to increase. There are, however, two reasons for the increase in consumer welfare: consumers gain from the large retailer's low price (because the upstream discount is partially passed on to the retail price) as well as from the high quality level offered by the traditional retailer. Contrary to the conventional wisdom most of the consumer welfare gains seem due to the latter. The intuition for this result is that price competition softens substantially as a result of firms' quality differentiation. We also investigate the effects of buyer market power on retail and wholesale prices as well as on producer welfare. Buyer Market Power and Vertically Differentiated RetailersShinn-Shyr Wang Christian Rojas Nathalie Lavoie * January 2010 AbstractWe consider a model of vertical competition where downstream firms (retailers) purchase an upstream input from a monopolist and are able to differentiate from each other in terms of quality. Our primary focus is to study the effects of introducing a large retailer, such as a WalMart Supercenter, that is able to lower wholesale prices (i.e. buyer market power). We obtain two main results. First, the store with no buyer market power responds to the presence of the large retailer by increasing its quality, a finding that is consistent with recent efforts by traditional retailers to enhance shoppers' buying experience (i.e. quality). Second, the presence of a large retailer causes consumer welfare to increase. There are, however, two reasons for the increase in consumer welfare: consumers gain from the large retailer's low price (because the upstream discount is partially passed on to the retail price) as well as from the high quality level offered by the traditional retailer. Contrary to the conventional wisdom most of the consumer welfare gains seem due to the latter. The intuition for this result is that price competition softens substantially as a result of firms' quality differentiation. We also investigate the effects of buyer market power on retail and wholesale prices as well as on producer welfare.

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“…In the years following Telser's contribution, several scholars have shown that RPM and other vertical restraints can be used to enhance dealers' incentives beyond the realm of point-of-sale service provision, including the incentive to promote product quality, ensure promotional efforts, engage in proper rotation of perishable goods, etc. (see, e.g., Klein and Murphy, 1988;Klein and Wright, 2007;Wright, 2007).…”

mentioning

confidence: 99%