Countervailing power and consumer prices

Article Abstract:

Consumer prices and transfer prices, in a setting where the number of imperfect retailers who deal with only one supplier decreases to a limit of two, decline to the marginal cost level and hurt both the retailers' and the supplier's profits when consumers begin to see the retailers' services as perfect substitutes. This countervailing effect, however, may not be realised when the supplier chooses not to deal with more than one retailer.

Consumer Prices, Research, Prices, Consumer price indexes

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Comparing vertical restraints

Article Abstract:

Retail prices under resale price maintenance (RPM) are lower than prices under exclusive territories or vertical integration. However, RPM offers lower service levels than alternative distribution approaches. Exclusive territories increase prices and produce more services than complete manufacturer integration into distribution. Under RPM, the manufacturer absorbs the additional costs of services by lowering wholesale price.

Analysis, Vertical integration, Resale price maintenance, Price maintenance

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