Question

manufacturers attempt to reduce retail price competition among retailers and support the manufacturer’s merchandise by encouraging retailers to

Answer 1

Manufacturers attempt to reduce retail price competition among retailers by suggesting minimum prices and stopping selling to retailers who regularly sell below the suggested price.

Step-by-step explanation:

Manufacturers attempt to reduce retail price competition among retailers and support their own merchandise by encouraging retailers to suggest minimum prices and by stopping selling to retailers who regularly sell below the suggested price. This practice allows manufacturers to maintain a certain level of pricing consistency and protect their brand image. By discouraging price undercutting, manufacturers can create a more stable and profitable retail environment.

Answer 2

Manufacturers can suggest minimum prices to retailers but cannot enforce minimum price contracts due to antitrust laws. They may stop supplying retailers who do not follow these suggestions. Larger retailers like Amazon use their cost structures to remain competitive without anticompetitive practices.

Step-by-step explanation:

Manufacturers attempt to reduce retail price competition among retailers and support the manufacturer's merchandise by employing tactics that are within legal boundaries. Although it is illegal for manufacturers to demand a minimum resale price maintenance agreement, which would restrict competition, they can legally suggest minimum prices to the retailers. To enforce these suggested prices, manufacturers may cease to supply retailers who do not adhere to these suggestions. This practice can sometimes walk a fine line and has implications related to antitrust laws that prohibit practices reducing competition such as tie-in sales, bundling, and predatory pricing.

For large-scale retailers like Amazon, their production model and cost structure allow them to set competitive prices and adjust their operations to meet market demands, including deciding on the production, opening or closing facilities, employment, and the introduction or discontinuation of products. These decisions are critical to staying competitive without breaching antitrust laws and manipulating retail prices.