Suggested retail price
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The Suggested Retail Price (SRP) sometimes called Manufacturer's Suggested Retail Price (MSRP) or Recommended retail price (RRP) of a product is the price the manufacturer recommends that the retailer sell it for. This helps to standardize prices among locations. While some stores always sell at below the suggested retail price, others do so only when items are on sale or clearance.
Suggested prices fly in the face of Competition Theory, as it allows prices to be set higher than would otherwise be the case, negatively impacting consumers.
Much of the time, stores charge less than the suggested retail price, depending upon the actual wholesale cost of each item, usually purchased in bulk from the manufacturer, or in smaller quantities through a distributor.
MSRP in the United States
Under earlier U.S. state "Fair Trade" statutes, the manufacturer was able to impose a fixed price for items. These fixed prices could offer some price protection to small merchants in competition against larger retail organizations. These were determined to be in restraint of free trade. However, some manufacturers have adopted MSRP — a price at which the item is expected to sell. This may be unrealistically high, opening the market to "deep discounters" who are able to sell products substantially below the MSRP while still making a profit. Recent trends have been for manufactures to set the MSRP closer to the "street price" — the price at which items actually sell in a free market.
A common use for MSRP can be seen in automobile sales in the United States. Prior to the spread of manufacturer's suggested retail pricing, there were no defined prices on vehicles and dealers were able to impose arbitrary markups, often with prices adjusted to what the salesperson thought the prospective purchaser would be willing to pay for a particular vehicle.
Currently, "sticker price" — the price of a vehicle as advertised by a particular dealer — often includes a substantial markup over the MSRP. This markup is often so high that dealers are willing to reduce the margin in order to complete a sale. To make up for the lowered sale prices, dealers will often impose additional charges on certain products such as new models or popular vehicles, as well as dealer items such as interior floor mats, striping, and even sometimes "dealer preparation". Regardless of these up and down adjustments, however, the MSRP remains the same and gives the consumer a starting point for negotiation.