Asked by Rebecca Lovato on May 16, 2024
Verified
Explain the practice of resale price maintenance and discuss why it is controversial.
Resale Price Maintenance
A practice where a manufacturer and its distributors agree on the price at which a product should be resold to the public.
Controversial
Something that causes disagreement or debate due to differing opinions or interpretations.
- Comprehend the economic reasoning for and the debates associated with resale price maintenance.
Verified Answer
RJ
Rahmatul Jamilatul Bahriah SarbaniMay 17, 2024
Final Answer :
Resale price maintenance is a requirement by producers that retailers sell their product for a price specified by the manufacturer. It is controversial because on the surface it appears to limit the ability of retailers to compete on the basis of price. However, if the manufacturer does not exercise resale price maintenance a free-rider problem may become evident among the retailers and ultimately lead to lower profits for the manufacturer.
Learning Objectives
- Comprehend the economic reasoning for and the debates associated with resale price maintenance.
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