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Upfront Payments and Listing Decisions

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  • Pio Baake
  • Vanessa von Schlippenbach

Abstract

We analyze the listing decisions of a retailer who may ask her suppliers to make upfront payments in order to be listed. We consider a sequential game with upfront payments being negotiated before short-term delivery contracts. We show that the retailer is more likely to use upfront payments the higher her bargaining power and the higher the number of potential suppliers. Upfront payments tend to lower the number of products offered by the retailer when the products are rather close substitutes. However, upfront payments can increase social welfare if they ameliorate inefficient listing decisions implied by short-term contracts only.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.83511.de/dp793.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 793.

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Length: 29 p.
Date of creation: 2008
Date of revision:
Handle: RePEc:diw:diwwpp:dp793

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Keywords: Buyer power; upfront payments; retailing;

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Cited by:
  1. Stephane Caprice & Vanessa von Schlippenbach, 2008. "Competition policy in a concentrated and globalized retail industry," Working Papers 23775, Institut National de la Recherche Agronomique, France.

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