Vertical contracts between manufacturers and retailers often aim to
A)Prevent the retailers from defeating upstream price discrimination through arbitrage
B)Reward the retailer for undertaking the risk inherent in introducing a new product
C)Serve as a "signal" of the manufacturer's belief of the likely success of his product
D)All of the above

Question

​Vertical contracts between manufacturers and retailers often aim to
A)​Prevent the retailers from defeating upstream price discrimination through arbitrage
B)Reward the retailer for undertaking the risk inherent in introducing a new product
C)Serve as a "signal" of the manufacturer's belief of the likely success of his product
D)​All of the above

Quizplus · Accepted Answer

Vertical contracts can serve multiple purposes, including preventing retailers from engaging in arbitrage that could defeat upstream price discrimination, incentivizing retailers to take the risk of introducing a new product, and acting as a signal from the manufacturer about their belief in the success of the product. Therefore, option D, "All of the above," is the best answer.

​Vertical Contracts Between Manufacturers and Retailers Often Aim to

Vertical Contracts Between Manufacturers and Retailers Often Aim to