Countervailing power and consumer prices
Consumer prices and transfer prices, in a setting where the number of imperfect retailers who deal with only one supplier decreases to a limit of two, decline to the marginal cost level and hurt both the retailers' and the supplier's profits when consumers begin to see the retailers' services as perfect substitutes. This countervailing effect, however, may not be realised when the supplier chooses not to deal with more than one retailer.
Publication Name: Economic Journal
Comparing vertical restraints
Retail prices under resale price maintenance (RPM) are lower than prices under exclusive territories or vertical integration. However, RPM offers lower service levels than alternative distribution approaches. Exclusive territories increase prices and produce more services than complete manufacturer integration into distribution. Under RPM, the manufacturer absorbs the additional costs of services by lowering wholesale price.
Publication Name: Journal of Economics and Business
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