Slotting Allowances: Empirical Evidence On Their Role In New Product Launches
Abstract
The retail practice of charging a fee to stock new products is a relatively new but growing phenomenon. Termed a "slotting allowance", it has attracted considerable scrutiny because of uncertainty about its purposes and consequences. We propose and statistically test several hypotheses to assess the degree of empirical support for each of several extant explanations. Slotting allowances, we find, are charged by relatively large retailers who have an informational advantage over the manufacturer about the likely success of the new product. This result apparently contradicts theorizing about the "informational" content of slotting fees, as well as other pro- and anti-competitive explanations. We also find support for the claim that when retailers fear that manufacturers will not provide post-launch support, they pay relatively high wholesale prices.Download Info
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Paper provided by University of Minnesota, The Food Industry Center in its series Working Papers with number 14348.Length:
Date of creation: 2000
Date of revision:
Handle: RePEc:ags:umrfwp:14348
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Keywords: Industrial Organization; Marketing;References
References listed on IDEASPlease 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.:
- Birger Wernerfelt, 1988. "Umbrella Branding as a Signal of New Product Quality: An Example of Signalling by Posting a Bond," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 458-466, Autumn.
- Bhattacharya, Sudipto, 1980. "Nondissipative Signaling Structures and Dividend Policy," The Quarterly Journal of Economics, MIT Press, vol. 95(1), pages 1-24, August.
- Wujin Chu, 1992. "Demand Signalling and Screening in Channels of Distribution," Marketing Science, INFORMS, vol. 11(4), pages 327-347.
- Martin A. Lariviere & V. Padmanabhan, 1997. "Slotting Allowances and New Product Introductions," Marketing Science, INFORMS, vol. 16(2), pages 112-128.
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