Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/57835
Authors: 
Hunold, Matthias
Muthers, Johannes
Year of Publication: 
2012
Series/Report no.: 
ZEW Discussion Papers 12-028
Abstract: 
We investigate the incentives of manufacturers to use resale price maintenance (RPM) when selling products through common retailers. In our model retailers provide product specific pre-sales services. If the competitive retail margins are low, each manufacturer fixes a minimum price to induce favorable retail services. With symmetric manufacturers, products are equally profitable in equilibrium and no product is favored as without RPM, but retail prices are higher. We show that minimum RPM can create a prisoner's dilemma for manufacturers without increasing, and possibly even decreasing the overall service quality. This challenges the service argument as an efficiency defense for RPM.
Subjects: 
biased sales advice
common agency
manufacturer dilemma
matching
retail service
RPM
vertical restraints
JEL: 
D83
L42
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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