Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Wednesday, January 21, 2009

Shelf Space Fees and Inter-Brand Competition

Posted by D. Daniel Sokol

Hao Wang, Peking University - China Center for Economic Research has posted a working paper on Shelf Space Fees and Inter-Brand Competition.

ABSTRACT: 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.

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