Publications

Journal Article

In recent years, the competition for shelf space has intensified, as more products now compete for a retail space that has remained roughly constant. In this paper, the authors analyze the dynamics of this competition in a multi-supplier retail point. Assuming that sales are shelf space dependent, we consider a retailer that optimizes its shelf space allocation among different products based on their sales level and profit margins. In this context, product manufacturers set their wholesale prices so as to obtain larger shelf space allocations but at the same time keep margins as high as possible.

The authors analyze the equilibrium situation in the supply chain, and find that generally the retailer's and the suppliers' incentives are misaligned, resulting in suboptimal retail prices and shelf space allocations.

They however find that the inefficiencies induced by suboptimal shelf space allocation decisions are small relative to those induced by suboptimal pricing decisions.