- March 12, 2008 - 16:00
- ZLC, Lecture Room A1
Prof. Victor Martínez de Albéniz
IESE Business School
“Competing for Shelf Space”
This paper studies competition for shelf space in a multi-supplier retail point. We consider a retailer that seeks to allocate its shelf space among different products to maximize its profit. To obtain larger shelf space allocations, product manufacturers can set lower wholesale prices, thereby increasing the retailer’s profit margin on their products. We analyze the competitive dynamics arising from the scarcity of space, and show existence and uniqueness of equilibrium. We then demonstrate that the inefficiencies from decentralizing decision-making are very small with wholesale-price contracts, and that full coordination can be achieved with pay-to-stay fee contracts. Our analysis demonstrates that price competition for shelf space is efficient, and that more elaborate contracting mechanisms (e.g., pay-to-stay fees) and alternate organizational structures (e.g., vertical integration with one supplier) can either only marginally improve or even decrease the total supply chain profits.
Co-author: Guillaume Roels (UCLA).
Víctor Martínez de Albéniz is assistant professor in IESE’s department of production, technology and operations management. An expert in supply chain management, his research focuses on understanding how supply chain decisions can help companies compete in the global arena. Prof. Martínez de Albéniz teaches courses on Operations Management, Operations Strategy, Logistics and New Product Development, both at the executive and MBA levels. He has also taught repeatedly at the renowned Massachusetts Institute of Technology (MIT).
Prof. Martínez de Albéniz has published in academic journals such as Production and Operations Management. He is member of the Institute for Operations Research and Management Sciences (INFORMS), which is the world’s largest organization of operations researchers and management scientists.
Areas of interest
- Supply chain management