Permanent URL to this publication: http://dx.doi.org/10.5167/uzh-51914
Buehler, Stefan; Gaertner, Dennis L (2009). Making Sense of Non-Binding Retail-Price Recommendations. Working paper series / Socioeconomic Institute No. 902, University of Zurich.
This paper provides a theoretical rationale for non-binding retail price recommendations (RPRs) in vertical supply relations. Analyzing a bilateral manufacturer-retailer relationship with repeated trade, we show that linear relational contracts can implement the surplus-maximizing outcome. If the manufacturer has private information about production costs or consumer demand, RPRs may serve as a communication device from manufacturer to retailer. We characterize the properties of efficient bilateral relational contracts with RPRs and discuss extensions to settings where consumer demand is affected by RPRs, and where there are multiple retailers or competing supply chains.
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|Item Type:||Working Paper|
|Communities & Collections:||03 Faculty of Economics > Department of Economics
Working Paper Series > Socioeconomic Institute (former)
|JEL Classification:||D23, D43, L14, L15|
|Deposited On:||29 Nov 2011 20:09|
|Last Modified:||09 Jul 2012 05:01|
|Series Name:||Working paper series / Socioeconomic Institute|
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