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Exclusionary Minimum Resale Price Maintenance
John Asker
New York University - Leonard N. School of Business - Department of Economics
Heski Bar-Isaac
Rotman School of Management, University of Toronto; New York University - Leonard N. Stern School of Business - Department of Economics
September 2012
NYU Working Paper
Abstract:
An upstream manufacturer can use minimum resale price maintenance (RPM)to exclude potential competitors. RPM lets the incumbent manufacturertransfer profits to retailers. If entry is accommodated, upstreamcompetition leads to fierce down-stream competition and the breakdown ofRPM. Hence, via RPM, retailers internalize the effect of accommodatingentry on the incumbent's profits. Retailers may prefer not toaccommodate entry; and, if entry requires downstream accommodation,entry can be deterred. We also discuss empirical and policyimplications, as well as the exclusion-ary potential of other methods ofsharing prots between upstream and downstream firms, such as slottingfees and revenue sharing.
Number of Pages in PDF File: 50
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Date posted: August 18, 2011
Suggested CitationAsker, John William and Bar-Isaac, Heski, Exclusionary Minimum Resale Price Maintenance (September 2012). NYU Working Paper . Available at SSRN: http://ssrn.com/abstract=1911714
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