Shelf space allocation based on supplier competition

In some retail contexts, displaying large quantities of inventory may stimulate demand. Suppliers are therefore continuously battling for the retailer´s limited shelf space. This paper models the impact of inventory subsidy contracts on the competition between suppliers. Consider a supply chain with two competing suppliers and their common retailer. We investigate how the suppliers react on the inventory subsidy charged by the retailer, and how the retailer sets the inventory subsidy rate. We also provide the condition under which a supplier stays in competition.