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Do Slotting Allowances Harm Retail Competition?

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Author Info
Øystein Foros
Hans Jarle Kind

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Abstract

Slotting allowances are fees paid by manufacturers to get access to retailers' shelf space. Both in the USA and Europe, the use of slotting allowances has attracted attention in the general press as well as among policy makers and economists. One school of thought claims that slotting allowances are efficiency enhancing, while another school of thought maintains that slotting allowances are used in an anti-competitive manner. In this paper, we argue that this controversy is partially caused by inadequate assumptions of how the retail market is structured and organized. Using a formal model, we show that there are good reasons to expect anti-competitive effects of slotting allowances. We further point out that competition authorities tend to use an unsatisfactory basis for comparison when analyzing welfare consequences of slotting allowances. Copyright © The editors of the "Scandinavian Journal of Economics" 2008 .

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9442.2008.00543.x
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Publisher Info
Article provided by Blackwell Publishing in its journal Scandinavian Journal of Economics.

Volume (Year): 110 (2008)
Issue (Month): 2 (06)
Pages: 367-384
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Handle: RePEc:bla:scandj:v:110:y:2008:i:2:p:367-384

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Sullivan, Mary W, 1997. "Slotting Allowances and the Market for New Products," Journal of Law & Economics, University of Chicago Press, vol. 40(2), pages 461-93, October.
  2. Irmen, Andreas, 1998. " Precommitment in Competing Vertical Chains," Journal of Economic Surveys, Blackwell Publishing, vol. 12(4), pages 333-59, September. [Downloadable!] (restricted)
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  3. Patrick Rey & Joseph Stiglitz, 1995. "The Role of Exclusive Territories in Producers' Competition," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 431-451, Autumn. [Downloadable!] (restricted)
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  4. Guttorm Schjelderup & Lars Sorgard, 1997. "Transfer Pricing as a Strategic Device for Decentralized Multinationals," International Tax and Public Finance, Springer, vol. 4(3), pages 277-290, July. [Downloadable!] (restricted)
  5. repec:ccp:journl:v:54:y:2003:i:1:p:111-125 is not listed on IDEAS
  6. Paul Dobson & Michael Waterson, 1999. "Retailer power: recent developments and policy implications," Economic Policy, CEPR, CES, MSH, vol. 14(28), pages 133-164, 04. [Downloadable!] (restricted)
  7. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December. [Downloadable!] (restricted)
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  8. Bonanno, Giacomo & Vickers, John, 1988. "Vertical Separation," Journal of Industrial Economics, Blackwell Publishing, vol. 36(3), pages 257-65, March. [Downloadable!] (restricted)
  9. Stiglitz, J. & Rey, P., 1988. "Vertical Restraints And Producers' Competition," Papers 13, Princeton, Woodrow Wilson School - Discussion Paper.
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  10. Dobson, Paul W & Waterson, Michael, 1997. "Countervailing Power and Consumer Prices," Economic Journal, Royal Economic Society, vol. 107(441), pages 418-30, March. [Downloadable!] (restricted)
  11. Gal-Or, Esther, 1991. "Duopolistic vertical restraints," European Economic Review, Elsevier, vol. 35(6), pages 1237-1253, August. [Downloadable!] (restricted)
  12. Patrick Rey ; Jeanine Thal ; Thibaud Vergé, 2006. "Slotting Allowances and Conditional Payments," Working Papers 2006-23, Centre de Recherche en Economie et Statistique, revised 2006. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Igor Muraviev, 2007. "Equilibrium Configurations of Distribution Channels in Bilaterally Oligopolistic Industries," Working Papers hal-00243078_v1, HAL. [Downloadable!]
  2. Oystein Foros & Hans Jarle Kind & Jan Yngve Sand, 2008. "Slotting Allowances and Manufacturers’ Retail Sales Effort," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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