Making Sense of Non-Binding Retail-Price Recommendations

Stefan Bühler () and Dennis Gärtner ()
Authors registered in the RePEc Author Service: Stefan Buehler

University of St. Gallen Department of Economics working paper series 2009 from Department of Economics, University of St. Gallen

Abstract: 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 surplusmaximizing 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.

Keywords: vertical relationships; relational contracts; asymmetric information; price recommendations (search for similar items in EconPapers)
JEL-codes: D23 D43 L14 L15 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2009-02
New Economics Papers: this item is included in nep-com, nep-cta, nep-mic and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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http://ux-tauri.unisg.ch/RePEc/usg/dp2009/DP-0902-Bu.pdf (application/pdf)

Related works:
Journal Article: Making Sense of Nonbinding Retail-Price Recommendations (2013)
Working Paper: Making Sense of Non-Binding Retail-Price Recommendations (2010)
Working Paper: Making Sense of Non-Binding Retail-Price Recommendations (2009)
Working Paper: Making Sense of Non-Binding Retail-Price Recommendations (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:dp2009:2009-02

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