A Market Experiment on Trade Promotion Budget and Allocation

We design a market experiment to examine how firm size and ability to choose trade promotion types influence trade promotion budget, its allocation and channel profits. Our experimental results show that larger manufacturers offer smaller trade promotion budgets. Manufacturers with ability to influence the allocation decision favor scan-backs while retailers favor off-invoices. Trade promotion decisions affect profit sharing within the channel but not total channel profit. We validate these findings with an econometric analysis of survey data from supermarket executives. Overall, our results suggest that market experiments can shed light on trade promotion outcomes for which industry data are sparse.


Subject(s):
Issue Date:
Sep 16 2009
Publication Type:
Working or Discussion Paper
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/55928
PURL Identifier:
http://purl.umn.edu/55928
Total Pages:
37
Series Statement:
Working Paper
2009-28




 Record created 2017-04-01, last modified 2020-10-28

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