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Slotting Allowances and Scarce Shelf Space

Authors


  • We thank Yaron Yehezkel, two anonymous referees, and seminar participants at Duke, Texas A&M, Washington University in St. Louis, and the Fourth Annual International Industrial Organization Conference for helpful comments.

Abstract

Slotting allowances are payments made by manufacturers to obtain retail shelf space. They are widespread in the grocery industry and a concern to antitrust authorities. A popular view is that slotting allowances arise because there are more products than retailers can profitably carry given their shelf space. We show that the causality can also go the other way: the scarcity of shelf space may in part be due to the feasibility of slotting allowances. It follows that slotting allowances can be anticompetitive even if they have no effect on retail prices.

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