Does Retailer Power Lead to Exclusion?

Abstract

This article examines whether retailer bargaining power and upfront slotting allowances prevent small manufacturers (who have no bargaining power) from obtaining adequate distribution. In contrast to the findings of Marx and Shaffer (2007), who show that all equilibria involve limited distribution (i.e., exclusion of a retailer), we show that there is always an equilibrium in which full distribution is obtained, provided that full distribution is the industry profit-maximizing outcome. The key feature leading to this differing result is that we do not restrict each retailer to offering the manufacturer a single tariff.

Replaces

Patrick Rey, and Michael Whinston, “Does Retailer Power Lead to Exclusion?”, TSE Working Paper, n. 11-227, February 2011.

Reference

Patrick Rey, and Michael Whinston, “Does Retailer Power Lead to Exclusion?”, The RAND Journal of Economics, vol. 44, n. 1, April 2013, pp. 75–81.