Price Protection in the Personal Computer Industry

H.L. Lee, V. Padmanabhan, T.A. Taylor and S. Whang

Washington University from Business, Law and Economics Center, John M. Olin School of Business, Washington University

Abstract: Price protection is a commonly used practice between manufacturers and retailers in the personal computer (PC) industry motivated by drastic declines of product values during the product life cycle. It is a form of rebate given by the manufacturer to the retailer for units unsold at the retailer, when the market (retail or wholesale) price drops during the product life cycle. It is a controversial policy in the PC industry as it is not clear how such a policy benefits the supply chain amd its participants. We show that price protection is an instrument for channel coordination.

Keywords: PRICES; MARKET STRUCTURE; COMPUTERS (search for similar items in EconPapers)
JEL-codes: D40 L86 (search for similar items in EconPapers)
Pages: 31 pages
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:fth:wablec:98-04

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