Price Promotions and Trade Deals with Multiproduct Retailers

Abstract

In this paper we study retail price promotions and manufacturer trade deals in markets with multiproduct retailers. We find that in situations where retailers carry more than one competing brand, the promotions across brands can be positively or negatively correlated depending on the structure of the market: the relative sizes of the various market segments (in terms of loyalty to manufacturer, retailer, or the pair manufacturer-retailer). We show that sometimes retailers offer the same discount on different products, but at other times they offer a smaller discount on a brand supported by a bigger trade deal. We also present results on the effects of changes in the sizes of the different market segments on the depth of price promotions and trade deals and on pass through.