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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.

Suggested Citation

  • Pio Baake & Vanessa von Schlippenbach, 2008. "Upfront Payments and Listing Decisions," Discussion Papers of DIW Berlin 793, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp793
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    Cited by:

    1. Stéphane Caprice & Vanessa von Schlippenbach, 2008. "Competition policy in a concentrated and globalized retail industry," Post-Print hal-02656654, HAL.

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    More about this item

    Keywords

    Buyer power; upfront payments; retailing;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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