STORE PROMOTION, MANUFACTURER COMPETITION AND WELFARE

Hao Wang (), Xundong Yin () and Alice Y. Ouyang
Additional contact information
Hao Wang: China Center for Economic Research, National School of Development, Peking University, P. R. China
Xundong Yin: China Academy of Public Finance and Public Policy, Central University of Finance and Economics, Beijing 100081, P. R. China
Alice Y. Ouyang: China Academy of Public Finance and Public Policy, Central University of Finance and Economics, Beijing 100081, P. R. China

The Singapore Economic Review (SER), 2022, vol. 67, issue 04, 1479-1496

Abstract: This study evaluates the partial exclusion effects of store promotion. We find that a manufacturer with a better brand name has a higher willingness-to-pay for promotion services offered by retail stores or online platforms. The promotion results in higher sales-weighted average prices (wholesale and retail) and a larger inter-brand price gap. The stores or platforms extract more profits from manufacturers and consumers through the promotion services. The effects on consumer surplus and social welfare depend on whether the promotion alters consumer preferences. If it does, more consumers would be choosing their less-preferred brands because of the larger inter-brand price gap, which would be socially inefficient. If it does not, the promotion may help to correct the price distortion, but the social welfare effect is positive only when the promotion effect is small enough. In both cases, the promotion services reduce the total consumer surplus by softening inter-brand competition.

Keywords: Promotion service; manufacturer competition; shelf space; welfare (search for similar items in EconPapers)
JEL-codes: L1 L4 M2 M3 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0217590821500442
Access to full text is restricted to subscribers

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:wsi:serxxx:v:67:y:2022:i:04:n:s0217590821500442

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0217590821500442

Access Statistics for this article

The Singapore Economic Review (SER) is currently edited by Euston Quah

More articles in The Singapore Economic Review (SER) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().