publication . Article . 1999

Percentage Retail Mark-Ups

Thomas von Ungern-Sternberg;
Open Access
  • Published: 01 Jan 1999 Journal: Swiss Journal of Economics and Statistics, volume 135, issue IV December, pages 539-557
Abstract
A common assumption in the literature on the double marginalization problem is that the retailer can set his mark-up only in the second stage of the game after the producer has moved. To the extent that the sequence of moves is designed to reflect the relative bargaining power of the two parties it is just as plausible to let the retailer move first. Furthermore, retailers frequently calculate their selling prices by adding a percentage mark-up to their wholesale prices. This allows a retailer to obtain higher profits than with a standard linear pricing policy. This result holds both for the case of simultaneous moves and when the retailer moves first. Under suc...
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