Upfront Payments and Listing Decisions

31 Pages Posted: 21 May 2008

See all articles by Pio Baake

Pio Baake

German Institute for Economic Research (DIW Berlin)

Vanessa von Schlippenbach

German Institute for Economic Research (DIW Berlin)

Date Written: May 1, 2008

Abstract

We analyze the listing decisions of a retailer who may ask her suppliers to make upfront payments in order to be listed. We consider a sequential game with upfront payments being negotiated before short-term delivery contracts. We show that the retailer is more likely to use upfront payments the higher her bargaining power and the higher the number of potential suppliers. Upfront payments tend to lower the number of products offered by the retailer when the products are rather close substitutes. However, upfront payments can increase social welfare if they ameliorate inefficient listing decisions implied by short-term contracts only.

Keywords: Buyer power, upfront payments, retailing

JEL Classification: L14, L42

Suggested Citation

Baake, Pio and Schlippenbach, Vanessa von, Upfront Payments and Listing Decisions (May 1, 2008). DIW Berlin Discussion Paper No. 793, Available at SSRN: https://ssrn.com/abstract=1135646 or http://dx.doi.org/10.2139/ssrn.1135646

Pio Baake (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Vanessa von Schlippenbach

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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