Assume that Bart's Batteries has entered into a resale price maintenance agreement with Radio Shanty but not with Prime Purchase. In this case,
A)the wholesale price of Bart's Batteries will be different for Radio Shanty than it is for Prime Purchase.
B)Bart's Batteries will never increase profits by having a resale price maintenance agreement with all retail outlets that sell its products.
C)Prime Purchase might benefit from customers who go to Radio Shanty for information about different batteries.
D)Radio Shanty will sell Bart's Batteries at a lower price than Prime Purchase.

Question

Quizplus · Accepted Answer

Resale price maintenance agreements can lead to situations where some retailers, like Radio Shanty in this case, are bound by the agreement to sell at a certain price, while others, like Prime Purchase, are not. This can lead to a scenario where customers might visit Radio Shanty to get information about the batteries, benefiting from the expertise and service provided, but then choose to purchase the product at Prime Purchase if it offers a lower price due to the absence of a resale price maintenance agreement. This phenomenon is known as "free riding."

Assume That Bart's Batteries Has Entered into a Resale Price