A manufacturer with significant market power should use
A)two-part tariffs and volume discounts to achieve coordination.
B)lot-size-based quantity discounts to achieve coordination.
C)forward-buying with retail coupons to achieve coordination.
D)liquidators and reverse-buying to achieve coordination.

Question

Quizplus · Accepted Answer

Two-part tariffs and volume discounts are effective strategies for a manufacturer to achieve coordination when they have significant market power. Two-part tariffs involve charging a fixed fee along with a per-unit price, which encourages buyers to purchase more units to reduce the fixed fee per unit. This helps the manufacturer to achieve higher sales volumes while also ensuring that the price per unit is optimal. Volume discounts involve offering lower prices for larger quantities, which encourage buyers to increase their orders. This helps to reduce production costs and improves coordination between the manufacturer and the retailers.

A Manufacturer with Significant Market Power Should Use