Slotting allowances as a facilitating practice by food processors in wholesale grocery markets: Profitability and welfare effects

    Authors

    S. F. Hamilton

    Comments

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    Abbreviated Journal Title

    Am. J. Agr. Econ.

    Keywords

    oligopsony; rent-shifting; slotting allowances; vertical market; structure; IMPERFECT COMPETITION; PRODUCT INTRODUCTIONS; OLIGOPSONY; CHANNEL; Agricultural Economics & Policy; Economics

    Abstract

    Slotting allowances, which are lump-sum transfers paid by food manufacturers to grocery retailers in return for various retail concessions, are becoming increasingly common in wholesale grocery markets. This article extends the literature on slotting allowances by considering two features that previously have been ignored: the role of food processors in determining these pricing arrangements, and the effect of slotting allowances on the size and distribution of economic surplus. Slotting allowances motivated by food processors increase procurement quantities and farm prices, and this raises farm surplus, increases total producer surplus, and improves consumer welfare in the food system.

    Journal Title

    American Journal of Agricultural Economics

    Volume

    85

    Issue/Number

    4

    Publication Date

    1-1-2003

    Document Type

    Article

    Language

    English

    First Page

    797

    Last Page

    813

    WOS Identifier

    WOS:000186274300001

    ISSN

    0002-9092

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