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Resale Price Maintenance and Restrictions on Dominant Firm and Industry-Wide AdoptionØ. ForosNorwegian School of Economics (NHH) - Department of Economics Hans Jarle KindNorwegian School of Economics & Business Administration (NHH); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Norwegian School of Economics (NHH) - Department of Economics Greg ShafferUniversity of Rochester - Simon Graduate School of Business August 25, 2010 ESRC Centre for Competition Policy Working Paper Series Abstract: We consider a model in which firms use resale price maintenance (RPM) to dampen competition. We find that even though the motive for using RPM is thus anticompetitive, market forces may limit the overall adverse impact on consumers. Indeed, we find that when there are a large number of firms in the market, consumer welfare under a laissez-faire policy might be as high or almost as high as it would be under an alternative policy in which RPM is banned. Government interventions that put an upper limit on the extent of industry-wide adoption of RPM can have adverse welfare effects in the model. We further show that proposed guidelines in the United States and Europe may come close to minimizing welfare.
Number of Pages in PDF File: 27 Keywords: Vertical restraints, safe harbors, antitrust policy JEL Classification: L13, L41, L42 working papers seriesDate posted: August 26, 2010Suggested CitationContact Information
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