Efficiency and Foreclosure Effects of Vertical Rebates: Empirical Evidence / Christopher T. Conlon, Julie Holland Mortimer.

Format:

Book

Author/Creator:

Conlon, Christopher T.

Contributor:

National Bureau of Economic Research.

Mortimer, Julie Holland.

Series:

Working Paper Series (National Bureau of Economic Research) no. w19709.

NBER working paper series no. w19709

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Efficiency and Foreclosure Effects of Vertical Rebates

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2013.

Summary:

Vertical rebates are prominently used across a wide range of industries. These con- tracts may induce greater retail effort, but may also prompt retailers to drop competing products. We study these offsetting efficiency and foreclosure effects empirically, using data from one retailer. Using a field experiment, we show how the rebate allocates the cost of effort between manufacturer and retailer. We estimate structural models of demand and retailer behavior to quantify the rebate's effect on assortment and retailer effort. We find that the rebate increases industry profitability and consumer utility, but fails to maximize social surplus and leads to upstream foreclosure.

Notes:

Print version record

December 2013.