Tuesday, August 31, 2010

Slotting Allowances and Scarce Shelf Space

Posted by D. Daniel Sokol

Leslie M. Marx, Duke University - Fuqua School of Business, Economics Group and Greg Shaffer, University of Rochester - Simon Graduate School of Business have an interesting paper on Slotting Allowances and Scarce Shelf Space.

ABSTRACT: Slotting allowances are payments made by manufacturers to obtain retail shelf space. They are widespread in the grocery industry and a concern to antitrust authorities. A popular view is that slotting allowances arise because there are more products than retailers can profitably carry given their shelf space. We show that the causality can also go the other way: the scarcity of shelf space may in part be due to the feasibility of slotting allowances. It follows that slotting allowances can be anticompetitive even if they have no effect on retail prices.



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