Question

A. Manufacturers often pay "slotting fees," payments to retailers to provide their product prime shelf space. These fees range from $25,000 for one item in one store to $3 million for a chain of stores. An example is placing Doritos within a football display before Super Bowl Sunday. a. In what type of market structure would this behavior likely be prevalent?

1) Monopolistic competition

2) Monopoly

3) Perfect competition

Answer 1

Manufacturers paying "slotting fees" to retailers for prime shelf space is prevalent in oligopolistic markets.

Step-by-step explanation:

The practice of manufacturers paying "slotting fees" to retailers for premium shelf space is commonly found in oligopolistic markets. Oligopoly refers to a market structure dominated by a small number of large firms, where the actions of one firm significantly impact the others. In this scenario, major manufacturers leverage their market power by offering fees to retailers, ensuring their products secure prominent display locations.

Paying slotting fees in oligopolistic markets is a strategic move to gain a competitive edge. By securing prime shelf space, manufacturers enhance visibility and attract more customers, contributing to increased sales. Industries such as automobiles, cable television, and commercial air travel, characterized by a limited number of dominant players, often witness such behavior as firms vie for advantageous positions to strengthen their market presence and influence consumer choices.