The manufacturer of Rubberware agrees to sell the distributor 1,000 boxes of 2-quart bowls only if he agrees to resell to the retailer at cost plus $1.10 per bowl and the retailer must agree to sell at no less than his cost plus. 50 per bowl. This is:
A) horizontal price fixing.
B) vertical price fixing.
C) vertical market allocation.
D) a group boycott.

Question

Quizplus · Accepted Answer

This is an example of vertical price fixing because it involves an agreement between different levels of the same supply chain (manufacturer to distributor to retailer) to adhere to specific pricing strategies. Horizontal price fixing would involve competitors at the same level agreeing on prices, which is not the case here. Vertical market allocation and group boycotts involve different practices not described in the scenario.

The Manufacturer of Rubberware Agrees to Sell the Distributor 1,000