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Does Retailer Power Lead to Exclusion?

  • Rey, Patrick
  • Whinston, Michael

This paper examines whether retailer bargaining power and upfront slotting allowances prevent small manufacturers (who have no bargaining power) from obtaining adequate distribution. In contrast to the findings of Marx and Shaffer (2007), who showed that all equilibria involve limited distribution (i.e., exclusion of a retailer), we show that there is always an equilibrium in which full distribution is obtained, provided that full distribution is the industry profit-maximizing outcome. The key feature leading to this differing result is that we do not restrict each retailer to offering the manufacturer a single tariff.

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Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 11-227.

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Date of creation: Feb 2011
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Publication status: Published in The RAND Journal of Economics, vol.�44, n°1, avril 2013, p.�75-81.
Handle: RePEc:tse:wpaper:24306
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  1. Ilya Segal, 1999. "Contracting With Externalities," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 337-388, May.
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