New Product Introduction and Slotting Fees

Claire Chambolle and Clémence Christin

Journal of Industrial Economics, 2021, vol. 69, issue 2, 410-442

Abstract: The availability of a new product in a store creates an informative spillover that extends past the store itself through word‐of‐mouth advertising. Because of this spillover, each retailer is able to extract a slotting fee from the manufacturer at product introduction. Slotting fees may discourage innovation by the manufacturer and, in turn, reduce consumer surplus and social welfare. A manufacturer is more likely to pay lower slotting fees when it can advertise more heavily, or when it faces a larger buyer. These results are robust to variations in retail competition, firms’ discount factors, and the identity of the innovating firm.

Date: 2021
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