Exclusionary Minimum Resale Price Maintenance
New York University - Leonard N. School of Business - Department of Economics
Rotman School of Management, University of Toronto; New York University - Leonard N. Stern School of Business - Department of Economics
NYU Working Paper
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: 50working papers series
Date posted: August 18, 2011
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo4 in 0.844 seconds