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Slotting Allowances and Buy-Back Clauses

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  • Gabrielsen, Tommy Staahl
Abstract
In this paper we investigate some of the most frequent arguments for the use of slotting allowances. It has been claimed that slotting allowances can be profitability used to increase retail profits at the cost of increasing consumer prices. A second argument is that slotting allowances can be used by producers of new product to signal the demand potential of their products. We find that in perfect information setting slotting allowances will never arise in equilibrium. Moreover, we question whether slotting allowances can serve as a signalling device. We argue that buy-back clauses are far better instruments to signal profitability of new product launches in the grocery sector.

Suggested Citation

  • Gabrielsen, Tommy Staahl, 2005. "Slotting Allowances and Buy-Back Clauses," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24580, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae05:24580
    DOI: 10.22004/ag.econ.24580
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    File URL: https://ageconsearch.umn.edu/record/24580/files/os05ga02.pdf
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    References listed on IDEAS

    as
    1. B. Douglas Bernheim & Michael D. Whinston, 1998. "Exclusive Dealing," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 64-103, February.
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    4. Tommy Staahl Gabrielsen & Lars Sørgard, 1999. "Discount Chains and Brand Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(1), pages 127-142, March.
    5. Akshay R. Rao & Humaira Mahi, 2003. "The Price of Launching a New Product: Empirical Evidence on Factors Affecting the Relative Magnitude of Slotting Allowances," Marketing Science, INFORMS, vol. 22(2), pages 246-268, January.
    6. Tommy Gabrielsen, 1996. "The foreclosure argument for exclusive dealing: The case of differentiated retailers," Journal of Economics, Springer, vol. 63(1), pages 25-40, February.
    7. Bonanno, Giacomo & Vickers, John, 1988. "Vertical Separation," Journal of Industrial Economics, Wiley Blackwell, vol. 36(3), pages 257-265, March.
    8. Wujin Chu, 1992. "Demand Signalling and Screening in Channels of Distribution," Marketing Science, INFORMS, vol. 11(4), pages 327-347.
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    Full references (including those not matched with items on IDEAS)

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    Keywords

    Demand and Price Analysis;

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