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Slotting Allowances and the Market for New Products

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Author Info
Sullivan, Mary W
Abstract

Slotting allowances are fixed fees paid to retailers by manufacturers in return for stocking new products on a trial basis. While slotting allowances emerged over 10 years ago, there is still no consensus on what purpose the fees serve. This article shows that slotting allowances are consistent with competitive behavior and could have been caused by an increase in the supply of products. A consumer search cost model predicts that when an increase in the supply of products is not accompanied by an increase in sales per store, the equilibrium slotting allowance will increase. The implications of the model are supported by trends in new-product activity, sales per store, and prices in the grocery industry. Anticompetitive explanations for slotting allowances are refuted by the trends in retailer and manufacturer profits and prices. Copyright 1997 by the University of Chicago.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Law & Economics.

Volume (Year): 40 (1997)
Issue (Month): 2 (October)
Pages: 461-93
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ucp:jlawec:v:40:y:1997:i:2:p:461-93

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  1. Guillermo Israilevich, 2004. "Assessing Supermarket Product-Line Decisions: The Impact of Slotting Fees," Quantitative Marketing and Economics, Springer, vol. 2(2), pages 141-167, June. [Downloadable!] (restricted)
  2. Simon Loertscher & Andras Niedermayer, 2008. "Fee Setting Intermediaries: On Real Estate Agents, Stock Brokers, and Auction Houses," Discussion Papers 1472, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  3. Greg Shaffer, 2005. "Slotting Allowances and Optimal Product Variety," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
  4. Oystein Foros & Hans Jarle Kind, 2006. "Do Slotting Allowances Harm Retail Competition?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  5. Lee, Cheryl Hill & Schluter, Gerald, 2002. "Why Do Food Manufacturers Introduce New Products?," Journal of Food Distribution Research, Food Distribution Research Society, vol. 33(01), March. [Downloadable!]
  6. 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!]
  7. 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). [Downloadable!]
  8. Adam D. Rennhoff, 2009. "The Competitive Effects of “Consideration Payments”: Lessons from Radio Payola," Working Papers 200904, Middle Tennessee State University, Department of Economics and Finance. [Downloadable!]
  9. Rennhoff, Adam D., 2004. "Paying For Shelf Space: An Investigation Of Merchandising Allowances In The Grocery Industry," Research Reports 25155, University of Connecticut, Food Marketing Policy Center. [Downloadable!]
  10. Park, John L., 2001. "Supermarket Product Selection Uncovered: Manufacturer Promotions And The Channel Intermediary," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 4(02). [Downloadable!]
  11. Carsten Eckel, 2009. "International Trade and Retailing," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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