Manufacturers often pay “slotting fees,” payments to retailers to provide their product prime shelf space. These fees range from $25,000 for one item in one store to $3 million for a chain of stores. An example is placing Doritos within a football display before Super Bowl Sunday.
a. In what type of market structure would this behavior likely be prevalent?
b. What does this behavior accomplish for the firm? Relate your answer to the observation that a typical supermarket stocks about 30,000 products.
c. Demonstrate the likely long-term profit in this market structure.
d. Firms have complained to the FTC that this practice is unfair. What is their likely argument?
e. What is an argument on the other side of that presented in d?
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