The Manufacturer's Suggested Retail Price
AbstractBased 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.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3954.
Date of creation: Jun 2003
Date of revision:
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Other versions of this item:
- D10 - Microeconomics - - Household Behavior - - - General
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
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