Economics Working Paper, Christian-Albrechts-Universität Kiel, Department of Economics 2015-02
This paper reviews the literature on how retailers, by their individual behavior or as a group, influence international trade flows, and on how trade affects the structure of the retail industry. After reviewing the evidence, we discuss theoretical contributions set in an oligopolistic, game-theoretic framework. An important message coming from these contributions is that when trade liberalization occurs, there is a strong incentive to use vertical restraints to soften price competition in order to mitigate the pro-competitive impact of trade liberalization. We then review contributions that consider retailing at the industry level to discuss what we know about the impact of trade liberalization on structural changes in retailing, such as changes in market concentration and the size distribution of retail firms, on retailers' assortments and even on upfront payments by manufacturers, such as slotting allowances, to gain access to retail shelves. We conclude by discussing some directions for future research.