Long-term Vertical Contracts, Geography, and the Persistence of Brand Shares

Robert Clark, Jean-François Houde and Xinrong Zhu

No 33906, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Previous research highlights persistent differences in national brand market shares across regions, driven by geographic consumer preferences and early entry advantages (Bronnenberg et al. 2007, 2009). This study investigates the extent to which long-term vertical contracts can explain the observed geographic dispersion and persistence of national brand dominance. Using NielsenIQ data from the same product categories as Bronnenberg et al. (2007), we follow Abowd et al. (1999) to decompose the variance in brand shares into Brand × Retailer and Brand × Market effects. Results show that 50% of the variance is explained by retailer effects, compared to 20% by market effects. This suggests that some retailers use vertical contracts that favor a specific brand across all markets in which they compete, such as exclusive-dealing, slotting allowances, or category-captaincy contracts, and that these play a key role in sustaining national brand dominance documented in prior literature. By emphasizing how retailer-specific factors drive observed patterns, we complement demand-side explanations and shift attention to supply-side factors that could affect competition.

JEL-codes: L42 L81 (search for similar items in EconPapers)
Date: 2025-06
Note: IO
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w33906.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:33906

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w33906
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().