The Manufacturer's Suggested Retail Price

Stephanie Rosenkranz

No 3954, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Based on arguments of the ?reference-dependent? theory of consumer choice we assume that a retailer?s discount of a manufacturer?s suggested retail price changes consumers? demand. We can show that the producer benefits from suggesting a retail price. If consumers are additionally sufficiently ?loss averse?, e.g. consumers? disappointment from higher than suggested retail prices is sufficiently high, the producer can force the retailer to take the suggested price in equilibrium and thus capture some of the retailer?s profits. A producer always benefits from investing into an advertising campaign with suggested retail prices.

Keywords: Vertical product differentiation; Manufacturer's suggested retail price; Advertising; Reference dependence; Loss aversion (search for similar items in EconPapers)
JEL-codes: D10 D40 L10 L20 M37 (search for similar items in EconPapers)
Date: 2003-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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