Winter makes the fundamental distinction between inter-retailer and inter-manufacturer effects and recognizes that, in contrast to price competition, retailer supply of promotional services to marginal consumers has primarily inter-manufacturer effects with little or no inter-retailer effects.
(1) MCR PW MCS Each retailer will set its retail price, PR, and sell qR units based on MCR and its price elasticity of demand.
As with other forms of promotion, consumers are not willing to pay the cost of providing the promotional shelf space, and charging for it would defeat its economic purpose of providing an effective price discount to a subgroup of consumers.(33) Retailers are forced by this competition to pass slotting fees on to consumers in terms of lower overall prices and increased services because slotting fees collected by a supermarket are related to a supermarket's sales.Specifically, it is not the case that retailers always will supply less than the desired amount of non-price competition."Exclusive Dealing Intensifies Competitive Bidding for Distribution unpublished working paper.The manufacturer, therefore, will pay the retailer a per unit time slotting fee on the promotional shelf space, which is logically equivalent to a lower wholesale price solely on the goods sold at the promotional shelf space.2000 rev'd, 246.3d 708 (D.C.Bibliography Areni, Charles, Dale Duhan Pamela Kiecker 1999.
Philip Kotlers book, marketing Management (1967, 1th edition) is the worlds most widely used leading textbook in marketing.
Given that manufacturers and retailers enter shelf space contracts, in sectionIII we then undertake the second step of the analysis by examining why retailer compensation for promotional shelf space sometimes involves a per unit time slotting fee.
The initial somewhat less than one dollar wholesale price decrease is not a net cost to the manufacturer because 100 per unit time must be transferred to the retailer as payment for promotional shelf space.
As illustrated in Figure1, supermarket shelf space relative to sales grew manual corsa 1.4 econoflex from.48 square feet per thousand dollars of real sales in 1983.20 square feet per thousand dollars of real sales in 2000, or a 38percent increase.
Inter-retailer competition, therefore, will lead retailers to decrease price more than they will increase sales and the manufacturer's shelf space payments to retailers will be eroded.
Barnes Noble, Inc.,.(29) However, manufacturers of less well-established products compete for stocking privileges, and manufacturers of all products must compete to obtain superior shelf space, such as more eye-level shelf "faces end-of-aisle displays, or placement near the check-out registers.Marketings new paradigms: Whats really happening out there.Dahlgran, RogerA., Molly Longstreth, MerleD.FTC Study, supra note.