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Demand Screening with Slotting Allowances and Failure Fees

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Listed author(s):
  • DeVuyst Cheryl S

    (North Dakota State University)

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    Abstract

    In the presence of scarce shelf space, retail grocers face the proliferation of new products and high failure rates. Accurately predicting the demand for a new product becomes increasingly difficult for retailers as the number of product offerings increases. This study explores slotting allowances and failure fees as mechanisms to screen new products' demand distributions. Mechanism design framework and two moments of the product demand distribution are utilized to eliminate mean-variance dominated products and separate non-dominated products by their demand distributions. Model results suggest that accurately designed menus of contracts including retail prices, slotting allowances, failure fees (or success rebates) and sales targets can separate products by their demand distributions and alleviate asymmetric information problems.

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    File URL: https://www.degruyter.com/view/j/jafio.2005.3.2/jafio.2005.3.2.1076/jafio.2005.3.2.1076.xml?format=INT
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    Article provided by De Gruyter in its journal Journal of Agricultural & Food Industrial Organization.

    Volume (Year): 3 (2005)
    Issue (Month): 2 (June)
    Pages: 1-19

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    Handle: RePEc:bpj:bjafio:v:3:y:2005:i:2:n:5
    Contact details of provider: Web page: https://www.degruyter.com

    Order Information: Web: https://www.degruyter.com/view/j/jafio

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    1. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
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    Cited by:

    1. 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).
    2. Stéphane Caprice & Vanessa Schlippenbach, 2013. "One-Stop Shopping as a Cause of Slotting Fees: A Rent-Shifting Mechanism," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(3), pages 468-487, 09.

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