Cooperative Advertising: An Alternative Interpretation of Price Discrimination

by R. Moran



The article asserts that cooperative advertising in the U.S. is the vehicle in demonstrating the plausibility of an alternative interpretation of price discrimination as it affects retailers and making note of the implications such an interpretation holds for public policy. Cooperative advertising involves payments by manufacturers to retailers in compensation for advertising products through local advertising media. If cooperatives advertising payments are aimed primarily at capitalizing on spillover effects, then the retailers who do not receive the most favorable rebates need not necessarily be thought of as injured parties. Further, if the generation of spillover is accomplished primarily by simply having the manufacturer's product displayed by "prestige" outlets, then any kind of rebate may be used to achieve this end. In short, if spillover effects are an important factor in certain areas of American retailing, then economists ought to begin rethinking their attitudes toward the meaning and effect of price discrimination. What remains to be undertaken, of course, is more detailed empirical groundwork into various areas of retailing to determine the importance of spillover effects with greater certainty.

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