A BEJEAP Advances article.

Abstract

Some commentators believe that slotting allowances enhance social welfare by providing retailers with an efficient way to allocate scarce retail shelf space. The claim is that, by offering their shelf space to the highest bidders, retailers act as agents for consumers and ensure that only the most socially desirable products obtain distribution. I show that this claim does not hold in a model in which a dominant firm and competitive fringe compete for retailer patronage. By using slotting allowances to bid up the price of shelf space, the dominant firm can sometimes exclude the competitive fringe even when welfare would be higher if the fringe obtained distribution.

Submitted: August 20, 2002 · Accepted: March 16, 2005 · Published: June 7, 2005

Originally published in Advances in Economic Analysis & Policy.

Recommended Citation

Shaffer, Greg (2005) "Slotting Allowances and Optimal Product Variety," Advances in Economic Analysis & Policy: Vol. 5 : Iss. 1, Article 3.
Available at: http://www.bepress.com/bejeap/advances/vol5/iss1/art3