Consumers value the product- specific services for a new smartphone at $20 and the marginal cost to the retailers for providing the product- specific services is $20. From the manufacturer's perspective, a resale price maintenance agreement ________be successful as it will _________ the equilibrium quantity sold.

Question

Quizplus · Accepted Answer

A resale price maintenance agreement will not be successful in changing the equilibrium quantity sold because the value consumers place on the product-specific services ($20) is equal to the marginal cost to the retailers for providing these services ($20). This means that the provision of these services is already at an equilibrium where the cost equals the consumer's valuation, and imposing a resale price maintenance agreement would not alter this balance, thus not affecting the equilibrium quantity sold.

Consumers Value the Product- Specific Services for a New Smartphone