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Slotting Allowances and Optimal Product Variety

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  • Shaffer Greg

    ()
    (University of Rochester)

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    Abstract

    Some commentators believe that slotting allowances enhance social welfare by providing retailers with an efficient way to allocate scarce retail shelf space. The claim is that, by offering their shelf space to the highest bidders, retailers act as agents for consumers and ensure that only the most socially desirable products obtain distribution. I show that this claim does not hold in a model in which a dominant firm and competitive fringe compete for retailer patronage. By using slotting allowances to bid up the price of shelf space, the dominant firm can sometimes exclude the competitive fringe even when welfare would be higher if the fringe obtained distribution.

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    Bibliographic Info

    Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

    Volume (Year): 5 (2005)
    Issue (Month): 1 (June)
    Pages: 1-28

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    Handle: RePEc:bpj:bejeap:v:advances.5:y:2005:i:1:n:3

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    Web page: http://www.degruyter.com

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    Web: http://www.degruyter.com/view/j/bejeap

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    Cited by:
    1. Oystein Foros & Hans Jarle Kind & Jan Yngve Sand, 2008. "Slotting Allowances and Manufacturers’ Retail Sales Effort," CESifo Working Paper Series 2396, CESifo Group Munich.
    2. Karp, Larry & Perloff, Jeffrey, 2011. "The iPhone Goes Downstream: Mandatory Universal Distribution∗," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7vc007jh, Department of Agricultural & Resource Economics, UC Berkeley.
    3. Oystein Foros & Hans Jarle Kind, 2006. "Do Slotting Allowances Harm Retail Competition?," CESifo Working Paper Series 1800, CESifo Group Munich.
    4. Miklos-Thal, Jeanine & Rey, Patrick & Vergé, Thibaud, 2008. "Buyer Power and Intraband Coordination," IDEI Working Papers 500, Institut d'Économie Industrielle (IDEI), Toulouse.
    5. von Schlippenbach, Vanessa, 2007. "REGALMIETEN UND DIE EFFIZIENZ VON ZULIEFERERVERTRAGEN (German)," 47th Annual Conference, Weihenstephan, Germany, September 26-28, 2007 7609, German Association of Agricultural Economists (GEWISOLA).

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