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New Product Introduction and Slotting Fees

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  • Claire Chambolle
  • Clémence Christin

Abstract

The availability of a new product in a store creates an informative spillover that extends past the store itself through word‐of‐mouth advertising. Because of this spillover, each retailer is able to extract a slotting fee from the manufacturer at product introduction. Slotting fees may discourage innovation by the manufacturer and, in turn, reduce consumer surplus and social welfare. A manufacturer is more likely to pay lower slotting fees when it can advertise more heavily, or when it faces a larger buyer. These results are robust to variations in retail competition, firms’ discount factors, and the identity of the innovating firm.

Suggested Citation

  • Claire Chambolle & Clémence Christin, 2021. "New Product Introduction and Slotting Fees," Journal of Industrial Economics, Wiley Blackwell, vol. 69(2), pages 410-442, June.
  • Handle: RePEc:bla:jindec:v:69:y:2021:i:2:p:410-442
    DOI: 10.1111/joie.12247
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