Efficiency and Foreclosure Effects of Vertical Rebates: Empirical Evidence

Christopher Conlon and Julie Mortimer

No 863, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: Vertical rebates are prominently used across a wide range of industries. These contracts may induce greater retail effort, but may also prompt retailers to drop competing products. We study these offsetting efficiency and foreclosure effects empirically, using data from one retailer. Using a field experiment, we show how the rebate allocates the cost of effort between manufacturer and retailer. We estimate models of consumer choice and retailer behavior to quantify the rebate’s effect on assortment and retailer effort. We find that the rebate increases industry profitability and consumer utility, but fails to maximize social surplus and leads to upstream foreclosure.

Keywords: foreclosure; vertical restraints; conditional pricing practices; rebates (search for similar items in EconPapers)
JEL-codes: L00 L4 L42 L8 L81 (search for similar items in EconPapers)
Date: 2014-09-25, Revised 2017-06-01
New Economics Papers: this item is included in nep-com
Note: previously circulated as "Efficiency and Foreclosure Effects of All-Units Discounts: Empirical Evidence"
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Efficiency and Foreclosure Effects of Vertical Rebates: Empirical Evidence (2021)
Working Paper: Efficiency and Foreclosure Effects of Vertical Rebates: Empirical Evidence (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:863

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