Download or read book Essays on Retail Product Assortment and Vertical Relationships written by Xinrong Zhu (Ph.D.) and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this dissertation, I study retail product assortments and how vertical relationships between manufacturers and retailers shape the retail landscape. The first chapter studies systematically the market share dispersion of national brands in 25 consumer packaged goods industries, and investigate the role of retailers in explaining the share dispersion. We first document stylized facts that the distribution of national top brand shares are asymmetric across retailers, even for retailers competing in the same geographic market, and the "share advantage" that a leading brand enjoys within a retailer is persistent across markets where the retailer is present and stable over time. We then specify and estimate a variance decomposition model to decompose the total variance in national brand shares and product assortments into a Brand * Retailer component and a Brand * Market component. We find that 50% to 60% of the total variance is accounted for by the Brand * Retailer component, while the Brand * Market component only explains about 10% to 20% of the total variance. Our results suggest that the large market share dispersion of national brands is caused by strong asymmetries in how these brands are presented in different retailers, even under similar market conditions. Finally we provide evidence that long-term vertical relationships between retailers and manufacturers is a key explanation for the strong asymmetries in national top brand shares across retailers and geographic regions. The second chapter takes the empirical evidence documented in the first chapter one step further, and studies a specific type of vertical arrangement---category captaincy contract. Category captaincy is a vertical arrangement whereby the retailer delegates pricing and assortment decisions of an entire category to one of the leading manufacturers within the category. These confidential contracts can lead to disproportionately higher market shares for the captain's products. The objective of the paper is to infer the existence of such contracts and to quantify their impacts on prices, market shares, and profits of manufacturers and retailers. I use the yogurt category as an empirical setting, in which the captain is either Dannon or Yoplait---the top two brands in the category by national market share. Using Nielsen scanner data, I first estimate a random-coefficient model of consumer demand. I use estimates of the brand-retailer specific shocks and a Bayesian inference model to classify retailers into one of the three categories: Dannon-captained retailers, Yoplait-captained retailers, or non-captained retailers. Conditional on the classified arrangements, I then apply conduct tests to infer that captains eliminate double markups from their own products, while the non-captain products still have double markups. The results from counterfactual experiments show that category captaincy arrangements increase market shares of the captain by about 50%, but they can also increase retailer profits and consumer welfare by eliminating double markups on the captain's products.