Competitive Effects of Vertical Restraints and Promotional Activity
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This dissertation empirically analyzes firm distribution andpromotion strategies. Chapter one examines the distribution of products through exclusive territory arrangements by developing a model in which manufacturers, producing for uncertain retail demand, utilize exclusive territories to ensure that all demand states, and retailers serving particular demand states, are served. Here exclusive territories result in higher prices, greater consumption, and the entry of small retailers such as convenience and drug stores to the retail market. Analyzing a natural experiment afforded by Indiana's legalization of exclusive territories in beer distribution, I estimate the effect of exclusive territories on price and consumption using a difference-in-differences model. I find that the legalization of exclusive territories in Indiana results in no change in prices or consumption. I also analyze a unique dataset of all licensed beer sellers in Indiana and find that exclusive territories did not cause significant entry by convenience or drug stores.
In Chapter two, I argue that retail promotions arranged by manufacturers offer researchers a window into the competitive interactions of oligopolistic manufacturers. Utilizing scanner data on sales and promotions at a major grocery store, I estimate the long-term effect of promotions on the sales of leading brands in 10 consumer packaged-goods categories. By testing the sales time series for unit roots, I find that promotions may have long-term effects on the sales of several brands in each category. By estimating the persistent impact of a brand's own promotions and the impact of competitors' promotions, I find that in some cases promotions have persistent positive impacts on sales, but these effects are small and greatly diminished by competitor promotions.
The final chapter utilizes retail promotions and prices to analyze the competitive interactions of leading manufacturers in 10 consumer packaged-good categories. Variables on competitor activity in other shared markets are included in reaction functions to evaluate whether firms respond across as well as within markets. Reactions to out of market promotions and price changes are small or zero, indicating that firms do not respond across markets.
Document number: osu1211990754
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