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Competitive Effects of Vertical Restraints and Promotional Activity
Kerr, Kirk W.

2008, Doctor of Philosophy, Ohio State University, Economics.

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.

Howard Marvel, PhD (Advisor)
James Peck, PhD (Committee Member)
Matthew Lewis, PhD (Committee Member)
230 p.

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