Assessing Supermarket Product-Line Decisions: The Impact of Slotting Fees |
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Authors: | Israilevich Guillermo |
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Institution: | (1) Bates White, LLC, USA;(2) Present address: 1301 20th Street NW, Washington, DC, 20036, USA |
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Abstract: | In this paper, I estimate a structural demand model for a product category in a supermarket chain. I use the model to infer
manufacturers' side payments to obtain shelf access in the supermarket and I estimate the impact of these fees on product
assortment.
The results suggest that the supermarket carries some unprofitable products. Instead of eliminating them, it charges slotting
fees to the manufacturers of those products.
Since the absence of slotting fees would lead the retailer to discontinue some products, this paper argues that forbidding
slotting fees would harm consumers. Welfare calculations reveal that product assortment in this market is close to socially
optimal. |
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Keywords: | slotting fees assortment scanner data virtual prices |
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