Two contract terms that reduce free-rider problems are:
A) double markups and two part pricing.
B) advertising provision and double markups.
C) exclusive territories and double markups.
D) advertising provision and exclusive territories.

Question

Quizplus · Accepted Answer

Advertising provision and exclusive territories are two contract terms that can reduce free-rider problems. By providing advertising support, the supplier can increase demand for the product, which in turn benefits the retailer. Exclusive territories ensure that the retailer is the only seller of the product in a particular geographic area, preventing other retailers from benefiting from the supplier's marketing efforts without contributing to them. These two terms incentivize the retailer to invest in selling the product, as they are protected from competition and can receive the full benefit of the supplier's marketing efforts.

Two Contract Terms That Reduce Free-Rider Problems Are