Koji Incorporated produces high-end cameras. Its typical camera comes with an array of options. The company has a good brand name.

a. Koji distributes its cameras through independent dealers who are given exclusive distribution rights for their respective market areas. Discuss why it might make eco- nomic sense for Koji to grant its distributors exclusive territories.

b. Since Koji adopted this distribution system, it has experienced a double markup problem. What is a double markup problem?

c. Discuss how Koji might use a two-part pricing scheme to reduce the double markup problem. (Be sure to specify what the two-part pricing scheme would entail.)

d. Describe one other method that Koji might use to address the double markup problem.