Recommended Retail Price Research Articles

Regulating recommended retail prices

This paper analyses the effects of regulated recommended retail prices (RRPs). Such recommendations by manufacturers are non-binding in nature and thus retailers do not have to adhere to them. We look at regulations, similar to that by the Federal Trade Commission (FTC), requiring at least some sales to take place at RRPs. Such regulations were introduced with the aim of protecting consumers. In the absence of regulation an equilibrium exists where the manufacturer charges the same wholesale prices across retailers. We show that regulating RRPs enables manufacturers to commit to their unobserved contracts, creating an equilibrium with wholesale price discrimination. We find that such an equilibrium increases manufacturer’s profits, but harms retailers and consumers.

Enhancing the Business Model: Automating the Recommended Retail Price Calculation of Products

Enhancing the Business Model: Automating the Recommended Retail Price Calculation of Products

Strategic Analysis of the Pricing Mechanisms in an Online Book Supply Chain in the Presence of Reference Price Effects

(1) Background: A binding recommended retail price has been used in several markets in a variety of forms, and the book market is a typical example. Publishers sell books to online retailers at a unit wholesale discount computed on the cover price. Retailers are then allowed to set the retail price. Therefore, if consumers regard the cover prices as reference points, then they may be more likely to purchase books if retail prices are lower than the cover prices. (2) Methods: We develop a Stackelberg game model for a book supply chain to investigates how reference price effects affect retailers and publisher’s pricing strategies. (3) Results: The results show that retailers will sell printed books at a discount only when the publisher’s wholesale discount rate is not high. Further, as the intensity of the reference price effects increases, (a) the lower boundary of the wholesale discount rate rises, (b) publishers’ profits increase and (c) retailers’ profits increase relative to the level of consumers’ e-books acceptance. (4) Conclusions: This result is related to the fact that the online retailer, such as Amazon and JD.com, like to invoke reference price effects in consumers’ minds by highlighting the printed book’s discount rate.

Psychophysiological Therapy from a Distance: The Art of Sharing

Psychophysiological Therapy from a Distance: The Art of Sharing

Pricing Strategy and Channel Co-ordination in a Two-Echelon Supply Chain Under Stochastic Demand

The proper coordination among the members of the supply chain is one of the greatest challenges among the supply chain managers and researchers. It is also experienced by the supply chain managers that, only the effective coordination among each entity of the chain can lead to more profit of members of the chain. In the proposed model, we have developed a two-echelon supply chain model considering one manufacturer and one retailer. The demand for items has been assumed to be stochastic since, in most of the cases, it is unpredictable. A part of the demand function has been assumed to be dependent on the unit selling price of the retailer which is sensitive to the recommended retail price of the manufacturer and another part is dependent on a random variable of market potential. According to the characteristics of the product, the manufacturer sometime offers buyback policy to the retailer but not always. For this reason, we investigate each case of the model where two decentralized decisions and one centralized decision are employed to explore the optimal behaviours in the corresponding circumstance. In the situation of demand uncertainty, the most profitable pricing strategy for the members of the supply chain is derived from this model. The numerical examples and the sensitivity of the key parameters show that the prevalent power of the decentralized decisions increases the selling price of the product and decrease the total profit of the supply chain. Also, the results ensure the fact that the joint decision taken by the manufacturer and the retailer leads to the maximum profit for the supply chain.

Tobacco industry pricing undermines tobacco tax policy: A tale from Bangladesh

The effectiveness of tax increase in reducing tobacco use depends on the extent to which the industry passes on the tax to consumers. Evidence suggests that tobacco industry may absorb or raise the price more than the tax increase depending on the price segment of tobacco products. In this paper, we examined the industry's pricing strategy by price segment of the cigarette market in Bangladesh by observing the deviation between the market retail prices (MRP) of cigarettes faced by consumers and government recommended retail prices (RRP) used as tax base in a four-tiered ad valorem tax structure. The RRPs by brands were collected from government sources. The MRPs by brands were collected by the International Tobacco Control Bangladesh Wave 3 Survey 2011–12 and Wave 4 Survey 2014–15. Applying linear regression to the deviation of MRP from RRP by price tiers, we found MRPs were higher than RRPs for higher-price brands allowing extra profit margin from the high end while lowering the relative price of and expanding demand for cheaper brands. Bangladesh cigarette industry adopted a differential pricing strategy that undermined the intended effect of tax policy change in reducing cigarette consumption and improving public health. This pricing strategy was supported by the tiered excise tax structure which should be replaced with a uniform specific excise system. In the face of growing cigarette affordability, it is crucial that the specific tax be increased routinely by an amount that induces cigarette price increases large enough to make cigarettes less affordable over time.

Book Review—Anne Applebaum’s <i>Red Famine</i> (2017)

The theme setting and particular relevance of artificial or man-made famines seems to come up in intervals, when tensions re-arise between ‘Western’ powers and Russia and seems to be useful for the purposes of ‘demonizing’ ‘Putin’—the current President of the Russian Federation, Vladimir Putin (2000–2008; 2012–)—, ‘the Kremlin’, the Russian government; or simply ‘Russia’ in the eyes of ‘the West’. In recent years, the famine of 1932–1933 has reached new heights as a politicized event to be instrumentalized in a ‘memory war’ on many discursive levels (history, mass media, memorialization, etc.) between key-representatives of the current countries Ukraine and Russia (Hordijk 2018). This should, symptomatically, remind us of the sheer power that media narratives have in shaping public imaginations.
 The reviewed book: Anne Elizabeth Applebaum. Red Famine: Stalin’s War on Ukraine. ISBN-13: 978–0–241–00380–0. London: Allen Lane, September 2017. Hardcover; 512 pages; recommended retail price: £25.00.

Association between medicine Price declaration by pharmaceutical industries and retail prices in Malaysia\u2019s private healthcare sector

BackgroundAs part of the initiatives to increase price transparency for consumers, pharmaceutical industry in Malaysia have been encouraged to declare the wholesale and recommended retail prices (RRP) of medicines to the Pharmaceutical Service Department (PSD) yearly. However, the relationship between the voluntary price reporting practices and consumers’ retail medicine price is unknown. Therefore, this study aims to evaluate the effect of the voluntary price reporting practice of pharmaceutical industry on retail medicine prices, factors that may affect consumer medicine prices in Malaysia’s private healthcare sector, and the retail medicine pricing trend over 2011–2015.MethodsA yearly correlation test for a 5-year period was performed to investigate the association between the wholesale and RRP medicine prices declared by the pharmaceutical industry from 2011 to 2015 on the one hand and the consumer wholesale and retail medicine price database on the other hand. The median price ratio (MPR) was calculated by comparing the consumer retail medicine price to its international reference price. The Krukal Wallis test was used to analyse the pricing trend throughout the 5-year period, and factors that might elevate the MPR above 2.5 were modelled using binary logistic regression.ResultsA total of 2527 medicine price data were analysed. There was a strong significant association between medicine prices declared to the PSD and the retail medicine prices in every year of the 5-year period. Moreover, there was no significant increase in retail medicine prices throughout the 5-year period. The medicine types, retail location, type of manufacturer, medicinal indications, declared wholesale and RRPs significantly influenced the consumer MPRs that where > 2.5.ConclusionThe declared medicine price was found to have a significant association with the consumer retail medicine price. Thus, it may be a useful reference for consumers purchasing medicines in private healthcare settings. However, the government of Malaysia must develop strategies to increase medicine price transparency for price-control mechanisms in the private healthcare sector.

Pricing of tobacco products during, and after, the introduction of standardized packaging: an observational study of retail price data from independent and convenience (small) retailers in the United Kingdom.

Background and aimsTobacco companies claimed that standardized packaging, phased in/introduced May 2016–May 2017, would reduce prices and increase consumption. We: (1) describe changes in price‐per‐cigarette and price‐per‐gram during, and after, the introduction of standardized packaging; (2) describe price changes by cigarette price segment; and (3) analyse price changes by stage of implementation.DesignAn observational study, using electronic point‐of‐sale data, monitored price trends in three periods: (1) May–September 2016, start of transition period; (2) October 2016–May 2017, when fully branded and standardized products were sold and duty escalators implemented; and (3) June–October 2017, when standardized packaging was mandatory.SettingUnited Kingdom.ParticipantsSmall retailers (n = 500) stratified by region and deprivation. Data were monitored for 20 leading fully branded tobacco products [15 factory‐made cigarettes (FMC), 5 roll‐your‐own (RYO)] and their standardized equivalents.MeasurementPrice‐per‐cigarette and price‐per‐gram, based on monthly average Recommended Retail Price (RRP) and actual sale price, adjusted for inflation using the Consumer Pricing Index (CPIH). Net changes (£GBP, %) were analysed by product type (FMC versus RYO) and FMC price segment (value, mid‐price, premium).FindingsBetween May 2016 and October 2017, the average inflation‐adjusted RRP/price‐per‐cigarette and price‐per‐gram increased for FMC (all price segments) and RYO. For example, sales price‐per‐cigarette increased +4.64%, with the largest increases for value (+6.81%), premium (+5.32%) and mid‐price FMCs (+3.30%). Net sales price‐per‐cigarette and price‐per‐gram increases were largest in period 2, when fully branded and standardized products were sold and duty escalators were implemented (FMC = +4.70%; RYO = +3.75%). There were small decreases in sales price‐per‐cigarette and price‐per‐gram once standardized packaging became mandatory (FMC = –1.14%; RYO = –0.88%).ConclusionIn the United Kingdom, the price of leading roll‐your‐own and factory‐made cigarette brands sold by small retailers increased as standardized packaging was phased in, with increases larger than expected through duty escalation.

Indexation of Tobacco Excise and Customs Duty and Smoking Prevalence Among Australian Adults, 2001-2010: A Serial Cross-sectional Study.

Australia's excise and customs duty on tobacco has been automatically increased biannually since 1984. Increases in duty on par with inflation ensured that tobacco stayed at least as costly as other goods. This would be expected to maintain, rather than drive down, smoking prevalence. We examined the association between smoking prevalence and duty over a 10-year period. Using monthly data from five Australian capital cities, collected from March 2001 to March 2010 among Australians aged at least 18 years, multiple linear regression modeled associations between smoking prevalence and the two components (duty and non-duty) of the recommended retail price of an average packet of cigarettes, adjusting for policy covariates. Prevalence declined from 23.6% in March 2001 to 17.0% in March 2010 [absolute difference 6.6%; 95% confidence interval (CI) = 6.5 to 6.8]. Duty increased from $0.2026 to $0.2622 per cigarette over the same period. In the adjusted model, a 1-cent increase in the duty component of price was not associated with changes in prevalence (0.019; 95% CI = -0.035 to 0.028). Increased non-duty component of price was associated with a decline in prevalence (-0.027; 95% CI = -0.052 to -0.002). This effect was stronger when changes in income were controlled for. In line with expectations, inflation-adjusted duty was not associated with changes in smoking prevalence, but it may have prevented upward pressure on prevalence that increasing affordability could have exerted. Frequent increases in duty greater than the growth in both wages and goods would more effectively reduce smoking than regular indexation. Few countries inflation-adjusted excise duty to ensure that tobacco products do not become more affordable; however, Australia experienced a decade of inflation adjustment alone, enabling the impact of this policy to be studied. This study shows that inflation-adjusted duty likely did prevent tobacco becoming more affordable and that indexation was associated with declines in smoking when tobacco companies over-shifted the duty rises (ie, increased price over and above duty rises).The study also suggests that frequent increases in taxation that exceed both wage growth and increases in costliness of other goods are needed to prompt increased rates of quitting.

The Response of Retailers in Scotland to the Standardised Packaging of Tobacco Products Regulations and Tobacco Products Directive.

IntroductionWith most marketing channels prohibited, the retail environment has assumed greater importance for tobacco companies, even in markets with a ban on the open display of tobacco products. Research has yet to qualitatively explore how retailers respond to standardized packaging in a country where this has been introduced.MethodsAs part of the DISPLAY study, face-to-face interviews were conducted with 24 small retailers in Scotland between May 23 and June 26, 2017; the interviews were conducted after The Standardised Packaging of Tobacco Products Regulations and the Tobacco Products Directive were fully implemented.ResultsWe found high retailer compliance with the legislation. With price-marked packs and packs containing less than 20 cigarettes and 30 g of rolling tobacco banned, retailers stated that this helped simplify ordering and stock management. The removal of price-marked packs also allowed them some flexibility to set their own prices, but many chose to stick closely to recommended retail price in order to remain competitive and avoid complaints from customers. In contrast to one of the tobacco industry’s arguments against standardized packaging, most retailers suggested that transaction times had not increased, even though the changes had only recently come into force.ConclusionsThis study challenges some of the arguments used against standardized packaging and provides an insight into the storage and pricing strategies adopted by retailers following the removal of price-marked packs.ImplicationsThis study explores the response of the retailers to the introduction of standardized tobacco packaging and provides an insight into the storage and pricing strategies adopted by retailers following the removal of price-marked packs. It explores the importance of the retailer in tobacco companies’ desire to maintain tobacco sales and challenges some of the arguments used against standardized packaging, such as an increase in transaction times. Countries seeking to introduce standardized packaging should monitor the experiences of retailers, preferably from preimplementation through to post implementation, to help understand how retailers respond to this policy and to inform compliance.

A study evaluating cost awareness amongst surgeons in a health service under financial strain

BackgroundDespite having considerable influence over resource allocation clinicians possess poor knowledge of healthcare costs. This study evaluated surgeons' cost-awareness with regard to surgical equipment and assessed attitudes towards health economics training using survey format. Materials and methodsAn online survey was distributed to 326 surgeons across a range of specialties in Ireland. Respondents were asked about their surgical expertise, previous training in health economics, and its role in the surgical curriculum. They were also asked to estimate the recommended retail price (RRP) of 17 commonly used items of surgical equipment. Answers within ±25% of the RRP were considered correct. ResultsOf 140 respondents, 62 (44.3%) were on a surgical training scheme and 16 (11.4%) were consultants. Overall, surgeons correctly estimated the RRP of only 14.0% of items. There was no difference in accuracy between surgeons in later years of training compared to their junior counterparts (13.1 ± 8.8% versus 15.0 ± 8.8%, p = 0.115). The highest individual score was six out of 17 items correctly estimated. Participants overestimated the cost of low-cost items by 347.7% and underestimated the cost of high-cost items by 35.5%. Only 5.7% of participants had received undergraduate training in health economics but 75.0% felt it should be included in the curriculum. Over two-thirds said their practice would change if they had better knowledge of the cost of surgical equipment. ConclusionThe majority of surgeons receive little training in health economics and have poor knowledge of the cost of surgical equipment. Most would welcome more training at both an undergraduate and postgraduate level. An opportunity exists to promote cost awareness in the operating room, which could lead to a reduction in waste and improved use of resources.

Thresholds for decision-making: informing the cost-effectiveness and affordability of rotavirus vaccines in Malaysia.

Cost-effectiveness thresholds (CETs) based on the Commission on Macroeconomics and Health (CMH) are extensively used in low- and middle-income countries (LMICs) lacking locally defined CETs. These thresholds were originally intended for global and regional prioritization, and do not reflect local context or affordability at the national level, so their value for informing resource allocation decisions has been questioned. Using these thresholds, rotavirus vaccines are widely regarded as cost-effective interventions in LMICs. However, high vaccine prices remain a barrier towards vaccine introduction. This study aims to evaluate the cost-effectiveness, affordability and threshold price of universal rotavirus vaccination at various CETs in Malaysia. Cost-effectiveness of Rotarix and RotaTeq were evaluated using a multi-cohort model. Pan American Health Organization Revolving Fund's vaccine prices were used as tender price, while the recommended retail price for Malaysia was used as market price. We estimate threshold prices defined as prices at which vaccination becomes cost-effective, at various CETs reflecting economic theories of human capital, societal willingness-to-pay and marginal productivity. A budget impact analysis compared programmatic costs with the healthcare budget. At tender prices, both vaccines were cost-saving. At market prices, cost-effectiveness differed with thresholds used. At market price, using 'CMH thresholds', Rotarix programmes were cost-effective and RotaTeq were not cost-effective from the healthcare provider's perspective, while both vaccines were cost-effective from the societal perspective. Using other CETs, both vaccines were not cost-effective at market price, from the healthcare provider's and societal perspectives. At tender and cost-effective prices, rotavirus vaccination cost ∼1 and 3% of the public health budget, respectively. Using locally defined thresholds, rotavirus vaccination is cost-effective at vaccine prices in line with international tenders, but not at market prices. Thresholds representing marginal productivity are likely to be lower than those reflecting human capital and individual preference measures, and may be useful in determining affordable vaccine prices.

Budget over health unless overweight: A Solomon four‐group study

AbstractBudget and health motivations for food purchase (e.g., discounts and health consciousness, respectively) affect consumer choice while shopping and well‐being afterward. However, not all findings from research have suggested that discounts/taxations on healthy/unhealthy food encourage health‐conscious food choice. On the other hand, the consumer behaviour line of research on the influence of front‐of‐package health messages has mostly echoed similar results that such communication leads to overconsumption; thus, obesity. We examined the influence of market practices targeting consumers’ budget and health‐related motivations for food purchase in a 2 (price: recommended retail price, discount price) × 2 (product: regular potato chips, potato chips with ‘75% less saturated fat’) experiment using six Solomon four‐group designs. Our results indicate that overweight consumers are not prone to discounts, unlike their normal‐weight counterparts. A price cut nullifies the influence of health messages on purchase intentions among normal‐weight buyers when the regular and healthier packaged foods are both on discount.

A Model of Recommended Retail Prices

Consumers rely on a manufacturer's recommended price to help determine whether to accept a retailer's price or continue to search. This paper demonstrates that doing so can be rational even if the manufacturer's price recommendation is cheap talk. By incentivizing search, a manufacturer trades off reducing double marginalization and losing consumers to competitors. When the manufacturer's cost is low he induces low retail prices and benefits when consumers search more. When the manufacturer's cost is high he induces high retail prices and benefits when consumers search less. Since consumers prefer to search more when lower prices are available, their incentives are aligned with the manufacturer's and this allows informative cheap communication. Aside from costs, the manufacturer can inform consumers of other market parameters such as product quality.

A model of recommended retail prices

Manufacturers frequently post nonbinding public price recommendations, but neither the rationale for this practice nor its impact on prices is well understood. I develop a model in which recommendations signal a manufacturer's production cost to searching consumers, who then form beliefs about retail prices. Increasing search makes consumers reject offers for the manufacturer's and competitors' products more often, and I show that both consumers and the manufacturer prefer more search when the production cost is low and less search when it is high. With incentives thus aligned, manufacturer recommendations inform consumers via cheap talk, and their removal harms both parties.

Expanding access to parasite-based malaria diagnosis through retail drug shops in Tanzania: evidence from a randomized trial and implications for treatment

BackgroundTanzania has seen a reduction in the fraction of fevers caused by malaria, likely due in part to scale-up of control measures. While national guidelines require parasite-based diagnosis prior to treatment, it is estimated that more than half of suspected malaria treatment-seeking in Tanzania initiates in the private retail sector, where diagnosis by malaria rapid diagnostic test (RDT) or microscopy is illegal. This pilot study investigated whether the introduction of RDTs into Accredited Drug Dispensing Outlets (ADDOs) under realistic market conditions would improve case management practices.MethodsDispensers from ADDOs in two intervention districts in Tanzania were trained to stock and perform RDTs and monitored quarterly. Each district was assigned a different recommended retail price to evaluate the need for a subsidy. Malaria RDT and artemisinin-based combination therapy (ACT) uptake and availability were measured pre-intervention and 1 year post-intervention through structured surveys of ADDO owners and exiting customers in both intervention districts and one contiguous control district. Descriptive analysis and logistic regression were used to compare the three districts and identify predictive variables for testing.Results and discussionA total of 310 dispensers from 262 ADDOs were trained to stock and perform RDTs. RDT availability in intervention ADDOs increased from 1% (n = 172) to 73% (n = 163) during the study; ACT medicines were available in 75% of 260 pre-intervention and 68% of 254 post-intervention ADDOs. Pre-treatment testing performed within the ADDO increased from 0 to 65% of suspected malaria patients who visited a shop (95% CI 60.8–69.6%) with no difference between intervention districts. Overall parasite-based diagnosis increased from 19 to 74% in intervention districts and from 3 to 18% in the control district. Prior knowledge of RDT availability (aOR = 1.9, p = 0.03) and RDT experience (aOR = 1.9, p = 0.01) were predictors for testing. Adherence data indicated that 75% of malaria positives received ACT, while 3% of negatives received ACT.ConclusionsTrained and supervised ADDO dispensers in rural Tanzania performed and sold RDTs under real market conditions to two-thirds of suspected malaria patients during this one-year pilot. These results support the hypothesis that introducing RDTs into regulated private retail sector settings can improve malaria testing and treatment practices without an RDT subsidy.Trial registration ISRCTN ISRCTN14115509

The Effects of Recommended Retail Prices on Consumer and Retailer Behaviour

This paper presents results from an experiment on the effects of recommended retail prices on consumer and retailer behaviour. We present evidence that recommended retail prices, despite their non‐binding nature, influence consumers’ willingness to pay by setting a reference point. At a given price, consumers buy more the higher the recommended retail price is, and their demand drops at prices above the recommended retail price, even when it is entirely uninformative about the value of the product. Retailers in this study are subject to similar anchoring effects, but they do not anticipate consumers’ behaviour well and are thus not able to exploit their behavioural biases.

Self Assessment in Paediatric Musculoskeletal Trauma X‐raysSakthivel‐WainfordK. Self Assessment in Paediatric Musculoskeletal Trauma X‐rays. M&K Publishing, Keswick, UK, First published 2008; 368 pp, revised second edition 2016, 277 illustrations Black & White, ISBN: 9781910451076 (Paperback version), ISBN: 9781910451571 (eBook version). Recommended retail price: 39GBP ($67AUD at 08/08/16).

Self Assessment in Paediatric Musculoskeletal Trauma X‐raysSakthivel‐WainfordK. Self Assessment in Paediatric Musculoskeletal Trauma X‐rays. M&K Publishing, Keswick, UK, First published 2008; 368 pp, revised second edition 2016, 277 illustrations Black & White, ISBN: 9781910451076 (Paperback version), ISBN: 9781910451571 (eBook version). Recommended retail price: 39GBP ($67AUD at 08/08/16).

Tobacco manufacturer brand strategy following plain packaging in Australia: implications for social responsibility and policy

Purpose This paper aims to inform social responsibility and social policy by describing the brand strategy of Australia’s largest tobacco manufacturer, British American Tobacco Australia (BATA), the year following the introduction of plain packaging and other regulation. Tobacco controls are a proven catalyst for reducing smoking, but manufacturers adapt swiftly seeking to minimise the impact of regulatory change. Design/methodology/approach BATA’s strategy was determined using 2012-2014 tobacco ingredient reports, recommended retail price lists and a supermarket retail audit. Findings The research identified over 70 BATA brand variants, offered in diverse packaging options, with new products and modified names appearing since 2012. In total 14 main brands are highly differentiated by price, with 45 per cent difference between the cheapest and the most expensive. Volume discounting occurs across packaging ranges, with twin packs offering best value and prices up to 10 per cent lower than those of single packs. Originality/value The research originality stems from the triangulation of three different data resources to establish brand strategy following increased regulation. The study confirms ongoing market segmentation using highly differentiated ranges, and it reveals the unintended consequences of corporate responses to regulation. Evolving variant names communicate product information and imagery previously imparted by pack design. Pricing strategies enable smokers to offset substantial excise increases through brand switching and volume buying. The research, therefore, reveals the potential for regulating these as yet unrestricted elements to enhance the impact of plain packaging and other tobacco controls, thereby further reducing the social impact of smoking.