Vertical Relationships between Manufacturers and Retailers: Inference with Limited Data

Sofia Villas-Boas

The Review of Economic Studies, 2007, vol. 74, issue 2, 625-652

Abstract: In this paper, different models of vertical relationships between manufacturers and retailers in the supermarket industry are compared. Demand estimates are used to compute price-cost margins for retailers and manufacturers under different supply models when wholesale prices are not observed. The purpose is to identify the set of margins compatible with the margins obtained from estimates of cost and to select the model most consistent with the data among non-nested competing models. The models considered are (1) a simple linear pricing model; (2) a vertically integrated model; and (3) a variety of alternative (strategic) supply scenarios that allow for collusion, non-linear pricing, and strategic behaviour with respect to private label products. Using data on yogurt sold in several stores in a large urban area of the U.S. the results imply that wholesale prices are close to marginal cost and that retailers have pricing power in the vertical chain. This is consistent with non-linear pricing by the manufacturers or high bargaining power of the retailers. Copyright 2007, Wiley-Blackwell.

Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (363)

Downloads: (external link)
http://hdl.handle.net/10.1111/j.1467-937X.2007.00433.x (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Vertical relationships between manufacturers and retailers: inference with limited data (2007)
Working Paper: Vertical relationships between manufacturers and retailers: inference with limited data (2006)
Working Paper: Vertical relationships between Manufacturers and Retailers: Inference with Limited Data (2005)
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:oup:restud:v:74:y:2007:i:2:p:625-652

Access Statistics for this article

The Review of Economic Studies is currently edited by Thomas Chaney, Xavier d’Haultfoeuille, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Katrine Loken, Elias Papaioannou, Vincent Sterk and Noam Yuchtman

More articles in The Review of Economic Studies from Review of Economic Studies Ltd
Bibliographic data for series maintained by Oxford University Press ().