IDEAS home Printed from https://ideas.repec.org/p/crs/wpaper/2006-23.html
   My bibliography  Save this paper

Slotting Allowances and Conditional Payments

Author

Listed:
  • Patrick Rey

    (Crest)

  • Jeanine Thal

    (Crest)

  • Thibaud Vergé

    (Crest)

Abstract

We analyze the competitive effects of upfront payments made by manufacturers to retailersin a contracting situation where rival retailers offer contracts to a manufacturer. In contrast toBernheim and Whinston (1985, 1998), who study the situation in which competing manufacturersoffer contracts to a common retailer, we find that two-part tariffs (even if contingent onexclusivity or not) do not suffice to implement the monopoly outcome. More complex arrangementsare required to internalize all the contracting externalities. The retailers can for exampleachieve the monopoly outcome through (contingent) three-part tariffs that combine slotting allowances(i.e., upfront payments by the manufacturer) with two-part tariffs where the fees areconditional on actual trade. The welfare implications are ambiguous. On the one hand, slottingallowances ensure that no efficient retailer is excluded. On the other hand, they allow firms tomaintain monopoly prices in a common agency situation. Simulations suggest that the lattereffect is more significant.

Suggested Citation

  • Patrick Rey & Jeanine Thal & Thibaud Vergé, 2006. "Slotting Allowances and Conditional Payments," Working Papers 2006-23, Center for Research in Economics and Statistics.
  • Handle: RePEc:crs:wpaper:2006-23
    as

    Download full text from publisher

    File URL: http://crest.science/RePEc/wpstorage/2006-23.pdf
    File Function: Crest working paper version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Juan Carlos Escanciano, 2005. "A Consistent Diagnostic Test for Regression Models Using Projections," Faculty Working Papers 09/05, School of Economics and Business Administration, University of Navarra.
    2. Gozalo, Pedro L. & Linton, Oliver B., 2001. "Testing additivity in generalized nonparametric regression models with estimated parameters," Journal of Econometrics, Elsevier, vol. 104(1), pages 1-48, August.
    3. repec:adr:anecst:y:2006:i:81:p:02 is not listed on IDEAS
    4. Herman J. Bierens & Werner Ploberger, 1997. "Asymptotic Theory of Integrated Conditional Moment Tests," Econometrica, Econometric Society, vol. 65(5), pages 1129-1152, September.
    5. Donald W. K. Andrews, 1997. "A Conditional Kolmogorov Test," Econometrica, Econometric Society, pages 1097-1128.
    6. Chen, Xiaohong & Fan, Yanqin, 1999. "Consistent hypothesis testing in semiparametric and nonparametric models for econometric time series," Journal of Econometrics, Elsevier, vol. 91(2), pages 373-401, August.
    7. Powell, James L & Stock, James H & Stoker, Thomas M, 1989. "Semiparametric Estimation of Index Coefficients," Econometrica, Econometric Society, vol. 57(6), pages 1403-1430, November.
    8. Hall, Peter & Yatchew, Adonis, 2005. "Unified approach to testing functional hypotheses in semiparametric contexts," Journal of Econometrics, Elsevier, vol. 127(2), pages 225-252, August.
    9. Lavergne, Pascal & Vuong, Quang, 2000. "Nonparametric Significance Testing," Econometric Theory, Cambridge University Press, vol. 16(04), pages 576-601, August.
    10. Lavergne, Pascal, 2001. "An equality test across nonparametric regressions," Journal of Econometrics, Elsevier, pages 307-344.
    11. Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-1057, September.
    12. Fan, Yanqin & Li, Qi, 1996. "Consistent Model Specification Tests: Omitted Variables and Semiparametric Functional Forms," Econometrica, Econometric Society, vol. 64(4), pages 865-890, July.
    13. Gozalo, Pedro L., 1997. "Nonparametric bootstrap analysis with applications to demographic effects in demand functions," Journal of Econometrics, Elsevier, vol. 81(2), pages 357-393, December.
    14. Whang, Yoon-Jae, 2001. "Consistent specification testing for conditional moment restrictions," Economics Letters, Elsevier, vol. 71(3), pages 299-306, June.
    15. Escanciano, J. Carlos, 2006. "A Consistent Diagnostic Test For Regression Models Using Projections," Econometric Theory, Cambridge University Press, vol. 22(06), pages 1030-1051, December.
    16. Bierens, Herman J, 1990. "A Consistent Conditional Moment Test of Functional Form," Econometrica, Econometric Society, vol. 58(6), pages 1443-1458, November.
    17. Sherman, Robert P., 1994. "U-Processes in the Analysis of a Generalized Semiparametric Regression Estimator," Econometric Theory, Cambridge University Press, vol. 10(02), pages 372-395, June.
    18. John Xu Zheng, 1996. "A consistent test of functional form via nonparametric estimation techniques," Journal of Econometrics, Elsevier, vol. 75(2), pages 263-289, December.
    19. Ait-Sahalia, Yacine & Bickel, Peter J. & Stoker, Thomas M., 2001. "Goodness-of-fit tests for kernel regression with an application to option implied volatilities," Journal of Econometrics, Elsevier, vol. 105(2), pages 363-412, December.
    20. Guerre, Emmanuel & Lavergne, Pascal, 2002. "Optimal Minimax Rates For Nonparametric Specification Testing In Regression Models," Econometric Theory, Cambridge University Press, vol. 18(05), pages 1139-1171, October.
    21. Stinchcombe, Maxwell B. & White, Halbert, 1998. "Consistent Specification Testing With Nuisance Parameters Present Only Under The Alternative," Econometric Theory, Cambridge University Press, vol. 14(03), pages 295-325, June.
    22. Horowitz, Joel L & Spokoiny, Vladimir G, 2001. "An Adaptive, Rate-Optimal Test of a Parametric Mean-Regression Model against a Nonparametric Alternative," Econometrica, Econometric Society, vol. 69(3), pages 599-631, May.
    23. Stoker, Thomas M, 1986. "Consistent Estimation of Scaled Coefficients," Econometrica, Econometric Society, vol. 54(6), pages 1461-1481, November.
    24. Lavergne, Pascal & Patilea, Valentin, 2008. "Breaking the curse of dimensionality in nonparametric testing," Journal of Econometrics, Elsevier, vol. 143(1), pages 103-122, March.
    25. Li, Q. & Wang, Suojin, 1998. "A simple consistent bootstrap test for a parametric regression function," Journal of Econometrics, Elsevier, vol. 87(1), pages 145-165, August.
    26. Donald, Stephen G. & Imbens, Guido W. & Newey, Whitney K., 2003. "Empirical likelihood estimation and consistent tests with conditional moment restrictions," Journal of Econometrics, Elsevier, vol. 117(1), pages 55-93, November.
    27. Bierens, Herman J., 1982. "Consistent model specification tests," Journal of Econometrics, Elsevier, vol. 20(1), pages 105-134, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Raff, Horst & Schmitt, Nicolas, 2009. "Buyer power in international markets," Journal of International Economics, Elsevier, pages 222-229.
    2. Raff, Horst & Schmitt, Nicolas, 2009. "Buyer power in international markets," Journal of International Economics, Elsevier, pages 222-229.
    3. Øystein Foros & Hans Jarle Kind, 2008. "Do Slotting Allowances Harm Retail Competition?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(2), pages 367-384, June.
    4. Rey, Patrick & Tirole, Jean, 2007. "A Primer on Foreclosure," Handbook of Industrial Organization, Elsevier.
    5. Bontems, Philippe & Dhar, Tirtha & Chavas, Jean- Paul, 2007. "Role of Bargaining in Marketing Channel Games of Quality Choice and Profit Share," Working Papers 201521, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    6. Battigalli, Pierpaolo & Fumagalli, Chiara & Polo, Michele, 2007. "Buyer power and quality improvements," Research in Economics, Elsevier, pages 45-61.
    7. Benjamin Klein & Joshua D. Wright, 2007. "The Economics of Slotting Contracts," Journal of Law and Economics, University of Chicago Press, vol. 50, pages 421-454.
    8. Stéphane Caprice, 2006. "Multilateral Vertical Contracting with an Alternative Supply: The Welfare Effects of a Ban on Price Discrimination," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(1), pages 63-80, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:crs:wpaper:2006-23. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sri Srikandan). General contact details of provider: http://edirc.repec.org/data/crestfr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.