Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76249
Authors: 
Bühler, Stefan
Gärtner, Dennis L.
Year of Publication: 
2009
Series/Report no.: 
Working Paper, Socioeconomic Institute, University of Zurich 0902
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.
Subjects: 
vertical relationships
relational contracts
asymmetric information
price recommendations
JEL: 
D23
D43
L14
L15
Document Type: 
Working Paper

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