Citation

Discussion Paper Details

Please find the details for DP3954 in an easy to copy and paste format below:

Full Details

Title: The Manufacturer's Suggested Retail Price

Author(s): Stephanie Rosenkranz

Publication Date: June 2003

Keyword(s): advertising, loss aversion, manufacturer's suggested retail price, reference dependence and vertical product differentiation

Programme Area(s): Industrial Organization

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.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3954

Bibliographic Reference

Rosenkranz, S. 2003. 'The Manufacturer's Suggested Retail Price'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3954