Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • September–October 2018
  • Article
  • Marketing Science

Online MAP Enforcement: Evidence from a Quasi-Experiment

By: Ayelet Israeli
  • Format:Print
ShareBar

Abstract

This paper investigates a manufacturer’s ability to influence compliance rates among its authorized online retailers by exploiting changes in the Minimum Advertised Price (MAP) policy and in dealer agreements. MAP is a pricing policy widely used by manufacturers to influence prices set by their downstream partners. A MAP policy imposes a lower bound on advertised prices, subjecting violating retailers to punishments such as termination of distribution agreements. Despite this threat, violations are common. I uncover two key elements to improve compliance: customization to the online environment and credible monitoring and punishments. I analyze the pricing, enforcement, and channel management policies of a manufacturer over several years. During this period, new channel policies take effect, providing a quasi-experiment. The new policies lead to substantially fewer violations. With improved compliance, channel prices increase by 2% without loss in volume. The reduction in violations is particularly stark among authorized retailers with lower sales volume, those that previously operated unapproved websites and those that have received violation notifications for the specific product before. Moreover, low service providers improve their service. At the same time, there is an increase in opportunistic behavior among top retailers, retailers that received notifications for other products, and for less popular products via deep discounting.

Keywords

Pricing Policies; Pricing; Channel Management; Legal Aspects Of Business; Retail; Price; Policy; Governance Compliance; Distribution Channels; Management; Retail Industry

Citation

Israeli, Ayelet. "Online MAP Enforcement: Evidence from a Quasi-Experiment." Marketing Science 37, no. 5 (September–October 2018): 710–732.
  • Find it at Harvard
  • Purchase

About The Author

Ayelet Israeli

Marketing
→More Publications

More from the Author

    • December 2022 (Revised January 2023)
    • Faculty Research

    Cann: High Hopes for Cannabis Infused Beverages

    By: Ayelet Israeli and Anne V. Wilson
    • November 2022
    • Faculty Research

    The Future of E-Commerce: Lessons from the Livestream Wars in China

    By: Ayelet Israeli, Jeremy Yang and Billy Chan
    • November–December 2022
    • Marketing Science

    The Value of Descriptive Analytics: Evidence from Online Retailers

    By: Ron Berman and Ayelet Israeli
More from the Author
  • Cann: High Hopes for Cannabis Infused Beverages By: Ayelet Israeli and Anne V. Wilson
  • The Future of E-Commerce: Lessons from the Livestream Wars in China By: Ayelet Israeli, Jeremy Yang and Billy Chan
  • The Value of Descriptive Analytics: Evidence from Online Retailers By: Ron Berman and Ayelet Israeli
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College