The effects of vendor allowances on market prices [Hebrew]

Abstract

A 2014 regulatory change in the Israeli grocery sector banned wholesalers from extending vendor allowances to large retailers, but not to small ones. Using unique transaction-level data from store registers and detailed vertical contracts in a difference-in-differences framework, with small retailers as the control group, we find that transfer payments increase wholesale and retail prices by 1.1% and 0.3%, while reducing retailer profits by 0.9%.