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Resale price maintenance in a successive monopoly model

Author

Listed:
  • Dertwinkel-Kalt, Markus
  • Wey, Christian
Abstract
We present a model to explain why a manufacturer may impose a minimum resale price (min RPM) in a successive monopoly setting. Our argument relies on the retailer having non-contractible choice variables, which could represent the price of a substitute good and/or the effort the retailer exerts for service provision or advertising. Our explanation for a min RPM is empirically distinguishable from alternative justifications for a min RPM that rely, for instance, on retailer competition and service free riding among retailers. Whether a min RPM benefits or harms consumers depends on-as we show-why a min RPM is implemented: if the goal is to soften competition with the substitute product, it tends to harm consumers, and if the goal is to secure service provision, it tends to benefit consumers.

Suggested Citation

  • Dertwinkel-Kalt, Markus & Wey, Christian, 2023. "Resale price maintenance in a successive monopoly model," DICE Discussion Papers 395, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:395
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Resale Price Maintenance; Vertical Restraints; Cost Pass-Through; Retailing;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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