The "New" Issue of JLE is Online

Josh Wright —  17 April 2008

The new issue of the Journal of Law & Economics is available online. This is an exciting development for me because the issue includes my paper with Ben Klein on The Economics of Slotting Contracts (SSRN version available here), and because it has been a very long wait to see the paper in final form (note the new release is of the August 2007 issue of JLE). The primary contribution of the paper is to explain the incidence of shelf space contracts as a consequence of the normal competitive process and examine the conditions under which those contracts will take the form of a lump sum per-unit time payment rather than a wholesale price or volume discount. We also have provide some empirical evidence that is consistent with the time series and cross-sectional incidence of slotting across product categories (see also here).

Readers with an interest in antitrust might want to also check out the Duso, Neven & Roller event study analysis of EU merger decisions and Taylor’s analysis of NIRA cartel performance. And to be filed under the category of “law of unintended consequences,” Jonathan Klick and Thomas Strattman also have a very interesting empirical piece demonstrating that state mandates requiring coverage of diabetes treatments have resulted in offsetting behavioral changes and higher Body Mass Index after the mandates.

The Klein and Wright abstract is below the fold:

Slotting fees, per-unit-time payments made by manufacturers to retailers for shelf space, have become increasingly prevalent in grocery retailing. Shelf space contracts are shown to be a consequence of the normal competitive process when retailer shelf space is promotional, in the sense that the shelf space induces profitable incremental individual manufacturer sales without drawing customers from competing stores. In these circumstances, retailer and manufacturer incentives do not coincide with regard to the provision of promotional shelf space, and manufacturers must enter shelf space contracts with retailers. Retailers are compensated for supplying promotional shelf space at least partially with a per unit- time slotting fee when interretailer price competition on the particular product makes compensation with a lower wholesale price a more costly way to generate equilibrium retailer shelf space rents. Our theory implies that slotting will be positively related to manufacturer incremental profit margins, a fact that explains both the growth and the incidence across products of slotting contracts in grocery retailing.