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Do Slotting Allowances Harm Retail Competition?

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  • �ystein Foros
  • Hans Jarle Kind

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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Bibliographic Info

Article provided by Wiley Blackwell 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

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  11. Shaffer Greg, 2005. "Slotting Allowances and Optimal Product Variety," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-28, June.
  12. Paul Dobson & Michael Waterson, 1999. "Retailer power: recent developments and policy implications," Economic Policy, CEPR & CES & MSH, vol. 14(28), pages 133-164, 04.
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  15. Sullivan, Mary W, 1997. "Slotting Allowances and the Market for New Products," Journal of Law and Economics, University of Chicago Press, vol. 40(2), pages 461-93, October.
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Citations

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Cited by:
  1. Øystein Foros & Hans Jarle Kind & Jan Yngve Sand, 2009. "Slotting Allowances and Manufacturers’ Retail Sales Effort," Southern Economic Journal, Southern Economic Association, vol. 76(1), pages 266-282, July.
  2. Pio Baake & Vanessa Schlippenbach, 2014. "The Impact of Upfront Payments on Assortment Decisions in Retailing," Review of Industrial Organization, Springer, vol. 44(1), pages 95-111, February.
  3. Igor Muraviev, 2007. "Equilibrium Configurations of Distribution Channels in Bilaterally Oligopolistic Industries," Working Papers hal-00243078, HAL.
  4. Chris Doyle & Martijn Han, 2014. "Cartelization Through Buyer Groups," Review of Industrial Organization, Springer, vol. 44(3), pages 255-275, May.
  5. Chris Doyle & Martijn A. Han, 2012. "Cartelization Through Buyer Groups," SFB 649 Discussion Papers SFB649DP2012-059, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  6. Aggey Semenov & Julian Wright, 2011. "Entry deterrrence via renegotiation-proof non-exclusive contracts," Working Papers 1105E, University of Ottawa, Department of Economics.
  7. Caprice, Stéphane & von Schlippenbach, Vanessa, 2013. "One-stop shopping as a cause of slotting fees: A rent-shifting mechanism," DICE Discussion Papers 97, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  8. Kenneth Fjell & Oystein Foros & Hans Jarle Kind, 2013. "On the Choice of Royalty Rule to Cover Fixed Costs in Input Joint Ventures," CESifo Working Paper Series 4332, CESifo Group Munich.

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