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Abstract
Since the 1980s, increased concentrations across marketing channels have
changed bargaining relationships between retailers and manufacturers both in North
America and in Europe. At the same time contract mechanisms within the marketing
channels have become more complex and private label market share have grown rapidly.
This paper Örst investigates the implications of bargaining between manufacturers and
retailers. The analysis applies to an arbitrary number of manufacturers and retailers, and
holds under general technology and product di§erentiation conditions, assuming that each
retailer acts as a monopolist on its own market. Under Nash bargaining, we show that two
widely used types of contracts (quantity forcing contracts and two-part-tari§ contracts) are
su¢ cient to obtain e¢ ciency in the channel conditionnally on products speciÖcations but
importantly generate a di§erent sharing of surplus. We then investigate the implications for
non cooperative quality choices made before the bargaining stage. We examine how the
bargaining power of retailers and manufacturers a§ect the quantity, pricing and quality
decisions. This provides useful insights into the changing relationships between
manufacturers and retailers. Our analysis helps explain the recent growth of private labels,
exclusive products for retailers designed by national brand manufacturers, the growing use
of side payments and other emerging trade practices.