Vertical Separation

Bonanno, Giambattista; Vickers, John

doi:10.2307/2098466

Cited by 344 publications

(307 citation statements)

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“…In effect, the dominant firm exploits its first-mover advantage to soften the downstream competition between retailers 1 and 2. This dampening-of-competition is derived in similar contexts by Bonanno and Vickers (1988), Lin (1990), Shaffer (1991), and others.…”

Section: Offering Slotting Allowances To Exclude Competitorssupporting

confidence: 61%

Slotting Allowances and Optimal Product Variety

Shaffer

2005

The B.E. Journal of Economic Analysis &Amp; Policy

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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.

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Section: Offering Slotting Allowances To Exclude Competitorssupporting

confidence: 61%

Slotting Allowances and Optimal Product Variety

Shaffer

2005

The B.E. Journal of Economic Analysis &Amp; Policy

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“…Our work is also related to the rich stream of literature on the determinants of vertical channel structure (McGuire and Staelin, 1983, Bernheim and Whinston, 1985, Bonanno and Vickers, 1988, Moorthy, 1988, Coughlan and Wernerfelt, 1989. Coughlan and Wernerfelt (1989) and Moorthy (1988) focus on the equilibrium channel structure when the manufacturers are the architects of the channel.…”

Section: Introductionmentioning

confidence: 99%

Agency Selling or Reselling? Channel Structures in Electronic Retailing

2016

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In recent years, online retailers (e-tailers) have started allowing manufacturers direct access to their customers while charging a fee for providing this access, a format commonly referred to as agency selling. In this paper, we use a stylized theoretical model to answer a key question that e-tailers are facing: When should they use an agency selling format instead of using the more conventional reselling format? We find that agency selling is more efficient than reselling and leads to lower retail prices; however, the e-tailers end up giving control over retail prices to the manufacturer. Therefore, the reaction by the manufacturer, who makes electronic channel pricing decisions based on their impact on demand in the traditional channel (brick-and-mortar retailing), is an important factor for e-tailers to consider. We find that when sales in the electronic channel lead to a negative effect on demand in the traditional channel, e-tailers prefer agency selling, whereas when sales in the electronic channel lead to substantial stimulation of demand in the traditional channel, e-tailers prefer reselling. This preference is mediated by competition between e-tailers -as competition between them increases, e-tailers prefer to use agency selling. We also find that when e-tailers benefit from positive externalities from the sales of the focal product (such as additional profits from sales of associated products), retail prices may be lower under reselling than under agency selling, and the e-tailers prefer reselling under some conditions for which they would prefer agency selling without the positive externalities.

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“…The idea that, in a full information framework, delegation can act as a strategic commitment device to relax competition traces back to Fershtman andJudd (1987), Sklivas (1987), Bonanno and Vickers (1988) and more recently Jansen (2003). In particular, Bonanno and Vickers (1988) find that in a differentiated good price competition model a manufacturer prefers to sell its product through an independent retailer rather than directly to consumers if it can publicly commit to a wholesale price above marginal costs, which induces a more lenient behavior of rivals. However, as shown by Coughlan and Wernerfelt (1989) and Katz (1991), this result no longer holds when contracts cannot be observed by rivals.…”

Section: Related Literaturementioning

confidence: 99%

The strategic value of partial vertical integration

Fiocco

2016

European Economic Review

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We investigate the strategic incentives for partial vertical integration, namely, partial ownership agreements between manufacturers and retailers, when retailers privately know their costs and engage in differentiated good price competition. The partial misalignment between the profit objectives within a partially integrated manufacturer-retailer hierarchy entails a higher retail price than under full integration. This 'information vertical effect' translates into an opposite 'competition horizontal effect': the partially integrated hierarchy's commitment to a higher price induces the competitor to increase its price, which strategically relaxes competition. Our analysis provides implications for vertical merger policy and theoretical support for the recently documented empirical evidence on partial vertical acquisitions.

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Vertical Separation

Cited by 344 publications

References 0 publications

Slotting Allowances and Optimal Product Variety

Slotting Allowances and Optimal Product Variety

Agency Selling or Reselling? Channel Structures in Electronic Retailing

The strategic value of partial vertical integration

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