Efficiency and Foreclosure Effects of Vertical Rebates: Empirical Evidence

Christopher Conlon and Julie Mortimer

No 19709, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Vertical rebates are prominently used across a wide range of industries. These con- tracts 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 structural models of demand 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.

JEL-codes: L0 L4 L42 (search for similar items in EconPapers)
Date: 2013-12
New Economics Papers: this item is included in nep-com and nep-exp
Note: IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published as Christopher T. Conlon & Julie Holland Mortimer, 2021. "Efficiency and Foreclosure Effects of Vertical Rebates: Empirical Evidence," Journal of Political Economy, vol 129(12), pages 3357-3404.

Downloads: (external link)
http://www.nber.org/papers/w19709.pdf (application/pdf)

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 (2017)
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:nbr:nberwo:19709

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w19709

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().