15.�� Vertical Price Restraints and Retail Servicesa)�� (10 marks).docx - 15 �� Vertical Price Restraints and Retail Services a ��(10

15.�� Vertical Price Restraints and Retail Servicesa)�� (10 marks).docx

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15. Vertical Price Restraints and Retail Services �� a) (10 marks). Consider the case in which the retailer �� chooses the retail price and the level of retail services. (i) Explain how a non-integrated manufacturer can use two-part tariffs to achieve the vertically integrated monopoly profit when the retailer is a monopolist but not when the retailers are competitive. (ii) Show how the non-integrated manufacturer can use RPM to achieve the vertically integrated profit when the dealers are competitive. b) (10 marks). Let manufacturing marginal cost and
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Unformatted text preview: �� retail demand be given by c = 3 and Q = 100(10 P)s and � respectively. Let dealer service be either s = 1 or 3 and let dealer service cost per unit be given by c(s) = s. Calculate the terms of the contract which allows a non-integrated manufacturer to earn the vertically integrated profit if they (i) use a two part tariff and face a monopoly dealer (ii) use RRM and face competitive dealers. (iii) Determine whether it is possible for the non-integrated manufacturer to earn the vertical integrated profit if it faces competitive retailers....
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  • Fall '17
  • Bob Maxwell

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