The Effects of Costs and Competition on Slotting Allowances

Kuksov, Dmitri; Pazgal, Amit
March 2007
Marketing Science;Mar/Apr2007, Vol. 26 Issue 2, p259
Academic Journal
We consider the optimal two-part tariff contract between a manufacturer and a retailer. We show that retail competition (in the presence of either fixed costs or bargaining power) may lead to slotting allowances in an optimal contract, even with a monopoly manufacturer and no information asymmetry. On the other hand, slotting allowances do not arise with a monopoly retailer and no information asymmetry, whether fire manufacturer is a monopoly or not. We also show that more intense retail competition, higher retail bargaining power, larger retailer fixed costs, lower marginal costs of retailing, as well as larger relative retailer size (whether coming from a location or operating advantage), have a positive impact on the incidence and the magnitude of slotting allowances. The opposing effects of the fixed and marginal operating costs on slotting allowances, as well as the impact of competition and bargaining power on profits, underscore the importance of careful definitions of these variables in empirical research.


Related Articles

  • BILATERAL MONOPOLY: FURTHER COMMENT. Campbell, Tom // Antitrust Law Journal;2008, Vol. 75 Issue 2, p647 

    The article presents a reply by the author on comments made by writer Jonathan B. Baker and colleagues on his article related to business monopoly and antitrust law published in a previous issue of the journal. The author clarifies that his article has relevance where small sellers band together...

  • Labor and Price Control. Forkosch, Morris D. // Labor Law Journal;Aug51, Vol. 2 Issue 8, p567 

    The article asserts that it is to U.S. labor's advantage to keep prices free so that wages may be free in collective bargaining. The article discusses the price presuppositions of capitalism; and the Government regulation of prices when private business is affected with a public interest. The...

  • A Study of the Competitiveness of Iran's Banking System. Najarzadeh, Reza; Reed, Michael; Mirzanejad, Hadi // Journal of Economic Cooperation & Development;2013, Vol. 34 Issue 1, p93 

    In this article the Panzar and Rosse approach is employed to assess the level of competition in the Iranian banking system during 1997-2010. Panel data is used for all the 18 banks (private and public) that have been commercially active for at least the last four years. The results show that...

  • Testing for Competition in the Nigerian Commercial Banking Sector. Ajisafe, Rufus Adebayo; Akinlo, Anthony Enisan // Modern Economy;Jul2013, Vol. 4 Issue 7, p501 

    The study determined the degree of competition in the banking sector between 1990 and 2009 using Panzar and Rosse (PR) methodology. The data for the study were obtained from the annual reports and statement of accounts of fifteen commercial banks in Nigeria which were purposively selected for...

  • International Prices and Endogenous Quality*. Feenstra, Robert C.; Romalis, John // Quarterly Journal of Economics;May2014, Vol. 129 Issue 2, p477 

    The unit values of internationally traded goods are heavily influenced by quality. We model this in an extended monopolistic competition framework where, in addition to choosing price, firms simultaneously choose quality subject to nonhomothetic demand. We estimate quality and quality-adjusted...

  • Commercial Policy and International Factor Mobility in the Presence of Monopolistic Competition. Anwar, Sajid // Journal of Economics;2001, Vol. 74 Issue 3, p259 

    This paper utilizes a well-known specification of returns to specialization (a variation of the Spence-Dixit-Stiglitz model) to explore the implications of local agglomeration effects for commercial policy and restricted factor mobility. The paper initially considers a small open economy where...

  • Central and Eastern Europe. McMillan, Andrew // Telecommunications - International Edition;Apr2000, Vol. 34 Issue 4, p86 

    Presents an overview of the telecommunications markets in Central and Eastern Europe. Issues that need to be tackled before true competition can come about; International expansion of West European players; State ownership; Extent of monopoly; Rebalancing of tariffs; Debate on whether Internet...

  • Intergenerational Welfare Effects of a Tariff under Monopolistic Competition. Bettendorf, Leon J.H.; Heijdra, Ben J. // Journal of Economics;2001, Vol. 73 Issue 3, p313 

    A dynamic overlapping-generations model of a semi-small open economy with monopolistic competition in the goods market is constructed. A tariff increase reduces real output and employment and improves the terms of trade, both in the impact period and in the new steady state. The tariff shock has...

  • Imperfect legal unbundling of monopolistic bottlenecks. Höffler, Felix; Kranz, Sebastian // Journal of Regulatory Economics;Jun2011, Vol. 39 Issue 3, p273 

    We study an industry with a monopolistic bottleneck supplying an essential input to several downstream firms. Under legal unbundling the bottleneck must be operated by a legally independent upstream firm, which may be partly or fully owned by an incumbent active in downstream markets. Access...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics