Making sense of non-binding retail-price recommendations

Arbeitspapier

We model non-binding retail-price recommendations (RPRs) as a communication device facilitating coordination in vertical supply relations. Assuming both repeated vertical trade and asymmetric information about production costs, we show that RPRs may be part of a relational contract, communicating private information from manufacturer to retailer that is indispensable for maximizing joint surplus. We show that this contract is self-enforcing if the retailer's profit is independent of production costs and punishment strategies are chosen appropriately. We also extend our analysis to settings where consumer demand is variable or depends directly on the manufacturer's RPRs.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3024

Classification and Topics

• Classification: Wirtschaft ; Organizational Behavior; Transaction Costs; Property Rights ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Transactional Relationships; Contracts and Reputation; Networks ; Information and Product Quality; Standardization and Compatibility
• Subject: vertical relationships ; relational contracts ; asymmetric information ; price recommendations ; Lieferanten-Kunden-Beziehung ; Preisbindung ; Unvollständiger Vertrag ; Verhalten in Organisationen ; Asymmetrische Information ; Unvollkommener Markt ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Buehler, Stefan ; Gärtner, Dennis L.
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/38922