Making Sense of Nonbinding Retail-Price Recommendations

Making Sense of Non-Binding Retail Price Recommendations

This paper provides a theoretical rationale for non-binding retail price recommendations (RPRs) in vertical supply relations. Analyzing a bilateral manufacturer-retailer relationship with repeated trade, we show that linear relational contracts can implement the surplus-maximizing outcome. If the manufacturer has private information about production costs or consumer demand, RPRs may serve as a...

‘Passivity’: A Model of Grocery Retail Price Decision-Making Practice

Purpose – This paper explores the applied context of grocery retail pricing practice to understand how pricing executives approach ‘regular price’ decision-making (as opposed to promotional pricing). The study seeks to inductively develop a model of regular price decision-making in grocery retailing. Methodology – The research employs an inductive methodology involving interviews with pricing e...

Making Sense of Ignoring Cents: Price Points and Price Rigidity under Rational Inattention

We explore the relationship between price points and price rigidity using two datasets. One is a large weekly transaction price data set, covering 29 product categories over an eight-year period from a large Midwestern United States supermarket chain. The other comes from the Internet and includes daily prices over a two-year period for a variety of consumer electronic products with a wide rang...

The Effects of Non-binding Retail-price Recommendations on Consumer and Retailer Behavior

This paper presents results from an experiment on the effects of retail-price recommendations (RPRs) on consumer and retailer behavior. Despite their non-binding nature, RPRs may influence consumers’ willingness to pay by setting a reference point. Loss averse consumers will then be reluctant to pay a price higher than the recommended one. Furthermore, at a given price level consumers will dema...

Price Image in Retail Management