Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/268656 
Year of Publication: 
2023
Series/Report no.: 
DICE Discussion Paper No. 395
Publisher: 
Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE), Düsseldorf
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.
Subjects: 
Resale Price Maintenance
Vertical Restraints
Cost Pass-Through
Retailing
JEL: 
L12
L41
D42
K21
ISBN: 
978-3-86304-394-0
Document Type: 
Working Paper

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