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Does Retailer Power Lead to Exclusion?

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  • Rey, Patrick
  • Whinston, Michael

Abstract

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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  • Rey, Patrick & Whinston, Michael, 2011. "Does Retailer Power Lead to Exclusion?," TSE Working Papers 11-227, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:24306
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    References listed on IDEAS

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    1. Ilya Segal, 1999. "Contracting with Externalities," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 337-388.
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    Cited by:

    1. Gabrielsen, Tommy Staahl & Johansen, Bjørn Olav, 2015. "Buyer power and exclusion in vertically related markets," International Journal of Industrial Organization, Elsevier, vol. 38(C), pages 1-18.
    2. Rey, Patrick & Verge, T., 2016. "Secret contracting in multilateral relations," TSE Working Papers 16-744, Toulouse School of Economics (TSE), revised Jul 2017.
    3. Ulsaker, Simen A., 2016. "Menu contracts and the division of profits in vertical relationships," Economics Letters, Elsevier, vol. 138(C), pages 72-74.
    4. Patrick Rey & Thibaud Vergé, 2017. "Secret contracting in multilateral relations," Working Papers 2017-44, Center for Research in Economics and Statistics.
    5. repec:bla:randje:v:48:y:2017:i:4:p:906-926 is not listed on IDEAS
    6. Roberto Burguet & Jozsef Sakovics, 2016. "Bidding for input in oligopoly," ESE Discussion Papers 266, Edinburgh School of Economics, University of Edinburgh.
    7. Yaron Yehezkel, 2014. "Motivating a Supplier to Test Product Quality," Journal of Industrial Economics, Wiley Blackwell, vol. 62(2), pages 309-345, June.
    8. Caprice, Stéphane & Von Schlippenbach, Vanessa & Wey, Christian, 2014. "Supplier Fixed costs and Retail Market Monopolization," TSE Working Papers 14-524, Toulouse School of Economics (TSE).
    9. Roberto Burguet & József Sákovics, 2017. "Competitive foreclosure," RAND Journal of Economics, RAND Corporation, vol. 48(4), pages 906-926, December.
    10. Enrique Ide & Juan-Pablo Montero & Nicolás Figueroa, 2016. "Discounts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 106(7), pages 1849-1877, July.
    11. Ulsaker, Simen A., 2016. "Interlocking relationships and quantity rationing," Economics Letters, Elsevier, vol. 146(C), pages 47-49.

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