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Quantitatively, for personal benefits, store managers at Best Buy have the incentive to resell on Amazon (as a grey marketplace) below Best Buy's retailer price.
Quantitatively, for personal benefits, store managers at Best Buy have the incentive to resell on Amazon (as a grey marketplace) below Best Buy's retailer price.
Assumptions: The manufacturer's list price is $100. Best Buy gets a 45% discount, so its cost is $55 per unit. This is because we use: Per unit cost = list price x (1-discount in %).
- Calculate Best Buy's retail price if it marks up by 30%. Hint: use the formula: mark-up = (retail price - cost) / retail price.
- Suppose the store manager gets a 20% discount off of Best Buy's retail price. Calculate the store manager's cost if he buys the product from his employer and resells it on Amazon as a grey marketplace.
- Suppose Amazon charges 10% of the resell price posted on its website and the reseller also has to pay a $5 shipping fee. Calculate the breakeven reseller price to be posted on Amazon for the store manager.
- From your calculations, explain the effect on the store manager's resale behavior on the retail price in the authorized channel at Best Buy.
- What additional incentives there are for the store manager to engage in this resale behavior?
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