 Slotting Allowances and Retailer Market PowerHao Wang
Industrial Organization from University Library of Munich, Germany Abstract: This paper uses a bilateral oligopoly model to study the slotting allowances in retailing industries. There are two symmetric manufacturers competing in the upstream market. In the downstream, there are a large retailer with considerable market share, and many small retailers with insignificant market shares. Suppose that only the large retailer is able to require slotting allowances. The retailers engage in price competition with spatial differentiation. The model suggests that the large retailer uses slotting allowances to capitalize its market power. By requiring slotting fees, the large retailer can raise the wholesale prices faced by the competing small retailers, and therefore lower their profit margins and market shares. The large retailer, on the contrary, achieves greater profit margins and market share. The lump sum part of the slotting fees is wholly bore by the manufacturers. But the slotting fees that are linear to the sales are actually bore by the competing small retailers and their customers. In this sense, requiring slotting allowance is an exclusionary strategy of the large retailer. Keywords: Exclusionary strategy; Market power; Slotting allowance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpio:0411009 Access Statistics for this paper More papers in Industrial Organization from University Library of Munich, Germany |
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