Vanessa von Schlippenbach

Upfront Payments and Listing Decisions

We analyze the listing decisions of a retailer who may ask her suppliers to make upfront payments in order to be listed. We consider a sequential game with upfront payments being negotiated before short-term delivery contracts. We show that the retailer is more likely to use upfront payments the higher her bargaining power and the higher the number of potential suppliers. Upfront payments tend to lower the number of products offered by the retailer when the products are rather close substitutes. However, upfront payments can increase social welfare if they ameliorate inefficient listing decisions implied by short-term contracts only.

Consumer Shopping Costs as a Cause of Slotting Fees: A Rent-Shifting Mechanism

Analyzing a sequential bargaining framework with one retailer and two suppliers of substitutable goods, we show that slotting fees may emerge as a result of a rent-shifting mechanism when consumer shopping costs are taken into account. If consumers economize on their shopping costs by bundling their purchases, their buying decision depends rather on the price for the whole shopping basket than on individual product prices. This induces complementarities between the goods offered at a retail outlet. If the complementarity effect resulting from shopping costs dominates the original substitution effect, the wholesale price negotiated with the first supplier is upward distorted in order to shift rent from the second supplier. As long as the first supplier has only little bargaining power, she compensates the retailer for the upward distorted wholesale price by paying a slotting fee. We also show that banning slotting fees causes per- unit price to fall and welfare to increase.

Collusive Effects of a Monopolist's Use of an Intermediary to Deliver to Retailers

A manufacturer contracting secretly with several downstream competitors faces an opportunism problem, preventing it from exerting its market power. In an infinitely repeated game, the opportunism problem can be relaxed. We show that the upstream firms market power can be restored even further if the upstream firm chooses a mixed distribution system in which it makes use of an intermediary to distribute the good to a subset of the retailers and delivers directly only to the remaining downstream firms.