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) a group boycott.
C) vertical market allocation.
D) vertical price fixing.

Question

Quizplus · Accepted Answer

This scenario is an example of vertical price fixing, where the manufacturer (a higher level in the supply chain) is setting minimum resale prices for the distributor and retailer (lower levels in the supply chain). Horizontal price fixing would involve competitors at the same level of the supply chain agreeing on prices, which is not the case here. A group boycott and vertical market allocation do not apply to this situation.

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