25 Pages Posted: 24 Dec 2008
Date Written: December, 22 2008
When in-store display influences consumer choices, shelf space allocation can be strategically used by retailers to extract payments from manufacturers. The paper finds that manufacturers with better brand names have higher willingness-to-pay for shelf spaces. Shelf space fees soften inter-brand competition and result in higher sale-weighted average retail price. The fees increase the total industry profit but lower the upstream profit. Both the aggregate consumer surplus and social welfare are negatively affected. This paper suggests that even when the shelf space fees do not drive small manufacturers out of marketplaces, they might still be anticompetitive.
Keywords: Antitrust, In-store display, Shelf space fee, Slotting allowance
JEL Classification: L1, L4, M2, M3
Suggested Citation: Suggested Citation