Ralph Winter, Apr 01, 2006
In this rejoinder, the author first responds to the discussion in Cooper, Froeb, O’Brien, and Vita’s Reply to Winter of a technical point, the relationship between retailer incentives and retailer margins, and then sets out their common ground and remaining differences on the broader theme of theory and evidence in vertical restraints cases. Cooper et al. stated in their original article that a retailer will provide a lower level of effort than is optimal for the manufacturer when the retailer’s margin is small relative to the manufacturer’s margin. The author claimed in his comment on the article that low retail margins do not necessarily lead to inadequate retailer incentives for promotion.