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Vertical conflict in distribution channels occurs when there are disagreements or disputes between different levels of the supply chain, typically between manufacturers, wholesalers, and retailers. In this scenario, the situation where a wholesaler and a retailer disagree on pricing perfectly illustrates vertical conflict. The wholesaler might feel that the pricing set by the retailer is too high or too low, which directly impacts the overall sales and profitability of both parties involved.

This type of conflict arises because each party has its own objectives and perspectives. The wholesaler seeks to maximize sales volume and maintain consistent pricing across different retailers, while the retailer may wish to alter prices based on local market conditions or competitive pressures, leading to potential friction. This encapsulates the essence of vertical conflict, as it involves two interconnected entities within the same distribution channel who are not aligned in their pricing strategies.

In contrast, other scenarios provided do not represent vertical conflict. Competing grocery stores refer to horizontal conflict, as it occurs among entities at the same level of distribution. Collaboration between two manufacturers also does not imply any conflict, and disputes amongst retailers about advertising costs involve entities at the same level, indicating horizontal conflict again. Thus, the identified scenario of disagreement between the wholesaler and retailer distinctly captures the nature of vertical conflict.