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Does retailer power lead to exclusion?
Author(s) -
Rey Patrick,
Whinston Michael D.
Publication year - 2013
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12011
Subject(s) - tariff , bargaining power , profit (economics) , microeconomics , distribution (mathematics) , outcome (game theory) , lead (geology) , industrial organization , economics , business , power (physics) , international trade , physics , quantum mechanics , geomorphology , geology , mathematical analysis , mathematics
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.