| The vertical contract,represented by slotting allowances,has always been a hot topic in the research of industrial organization,and has also been the focus of antitrust authorities in various countries.The dominating party of vertical contract in the retail industry chain has changed with the change of the industrial environment.In the early times,products were in short supply;therefore,most upstream manufacturers had absolute voice and "seller" market power.The seller determined the vertical contract and controlled downstream retailers who would normally accept the contract unconditionally.From the 1980's-1990's,with the effective supply capacity of the products greatly improved,the product market transformed from "short-supply" into"over-supply".Basically,the situation where manufacturers absolutely dominate the retail chain has almost disappeared.At the same time,with the entry of multinational retailers,mergers and reorganization of retail groups,downstream retailers have gained increasing seller market power and have started to exert "inverse vertical control" over upstream manufacturers.The most commonly used and hotly debated contract adopted by retailers is slotting allowances.Since the 21st century,the popularity of internet technology has greatly improved online retail.Online distribution has become an outside distribution option for manufacturers and has reduced their reliance on traditional chain retailers.Consequently,a change in the relative power between upstream and downstream firms has shifted the dominance in the formulation of vertical contracts.In other words,both manufactures and retailers hold market power to a certain degree,but neither party is able to be dominant when drafting the vertical contract.At the same time,online retailers have accumulated sufficient "platform" market power and have also started to charge online slotting fees from their trading partners.Research on traditional vertical contracts dominated by manufactures is relatively abundant in academic circles;however,studies on vertical contracts by alternative parties are scarce.Online slotting fees between upstream manufacturers and platform retailers are even scarcer.Retailers and manufacturers in reality are divided on the mechanism of vertical contracts and this has caused many conflicts between them.In other words,there is a gap between theoretical research and the urgent need of recognition and understanding of slotting fees under the new settings of the retail industry.This study uses slotting allowances contracts in physical and online retail as the typical representative of vertical contracts,explores their formation and action mechanisms and examines their welfare effect.As a key result,it provides decision support for distribution strategies by manufacturers under different retail modes.It also provides theoretical guidance on how to coordinate new vertical relations by using slotting allowances.In more detail,the study has accomplished the following tasks:(1)The study finds new conflicts between manufacturers and retailers by recognizing contradictions which are beyond traditional wisdom.This has helped to refine the research topic.The study reviews the existing literature and sorts out the existing research of slotting allowances.First,it defines slotting allowances and related concepts.Second,it reviews domestic and international literature of slotting allowances along two theoretical paths,namely one school of"efficiency improving" and the second school of "power exerting".At the same time,it also briefs on theoretical research of channel selection,exclusive dealing and information sharing which constitute the theoretical background of the research and provides the appropriate theoretical point of entry.(2)The study introduces a status quo of slotting allowances in China.Based on retail mode and according to a manufacturer's distribution decision and buyer power,it builds a framework of formation and action mechanism of slotting allowances.Then it explains the main content and research approach.Specifically,it analyzes slotting fees under four different settings.(3)The study reveals the formation and mechanism of slotting allowances contracts based on exclusive-dealing mechanisms in physical retail.One chapter focuses on whether dominant manufacturers have an incentive to squeeze competitors out of the market by offering slotting allowances when upstream manufacturers are asymmetric.(4)This paper discusses the formation and mechanism of slotting allowances contracts based on service-promotion mechanisms in online retail.One chapter focuses on the conditions that slotting allowances should satisfy in order to guarantee an agreement between a platform retailer and its upstream suppliers and then analyzes their effect on competition.The study shows that the linear service-promotion fee can not only increase the profit of an active manufacturer,but also the profits of its competitors.Therefore,online retailers should be encouraged to provide more promotional services.(5)From the perspective of channel selection,one chapter compares the profit of the manufacturer through three types of distribution channels:single physical channel,single direct online channel and "physical&online" and analyzes the formation and function of slotting fees in the process of a manufacturer's channel decision.The conclusion is that the combination of physical and direct online channels can bring higher profits for both the manufacturer and the retailer,and so "physical&online" becomes a Pareto optimal case.Therefore,even if a higher slotting fee is required,it still makes sense for manufacturers to stick to the combination of physical and direct online channels to sell products.(6)Given the fact that online platform retailers hold private information about market demand,one chapter analyzes whether manufacturers have incentives to add an online channel to the original retailer channel and achieve channel cooperation based on information sharing through the payment of online slotting fees.The conclusion is that in the case of dual channel distribution with information,manufacturers achieve higher profits.In addition,under certain conditions,sharing information can also increase the profit of physical retailers.The stronger the ability of platform retailers in information gathering,the higher the profits that will be gained by each participant.Therefore,platform retailers should make full use of "big data" and other technical advances to enhance their ability to collect information.Meanwhile,strategic cooperation between manufacturers and platform retailers should be encouraged.(7)The theoretical conclusions are integrated and applied to guide the manufacturer's distribution decisions.One chapter combines theory with reality and comes up with a systematic decision logic.By using the logic,the paper interprets typical cases in real life and examines the explanatory ability of theoretical propositions for industrial reality.At the same time,it identifies shortcomings of the theoretical research and explores potential directions of future research.This research is not only a systematic and in-depth exploration of the mechanisms underlying slotting allowances contracts in different retail modes,but also a theoretical innovation of Galbraith's buyer's countervailing power hypothesis.The research expands the hypothesis from physical retailers to online platform retailers,and further verifies its welfare effect.The theoretical paradigm formed in the research process can also be applied to the study of the formation and action mechanisms of other vertical contracts.In this way,the study makes the following contributions:It reveals the general action mechanism of new vertical contracts;it enriches the theory of vertical contracts in industrial organization under new settings;it also further provides theoretical guidance and suggestions for the formulation of enterprise strategy of distribution and anti-monopoly policy. |
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