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Competitive Resale Price Maintenance in the Absence of Free-Riding

52 Pages Posted: 9 Jul 2011  

Benjamin Klein

University of California, Los Angeles (UCLA) - Department of Economics; Compass Lexecon

Date Written: 2009

Abstract

Resale price maintenance need not be economically justified by the prevention of free-riding. Consistent with business realities, point-of-sale retailer promotional efforts often have a significant effect on consumer demand for a manufacturer’s products; and manufacturers often use resale price maintenance as an efficient way to purchase these promotional services from retailers. Even when there is no retailer free-riding, a retailer that discounts may reduce the compensation received by other retailers for promoting the manufacturer’s products, leading other retailers to discontinue distribution or reduce the promotional efforts they devote to the sale of the manufacturer’s products. The resulting reduction in demand for the manufacturer’s products provides a procompetitive rationale for the prevention of retailer price discounting. This broadly applicable procompetitive motivation for resale price maintenance has important implications for antitrust analysis, whether the legal standard is rule of reason or per se liability.

Keywords: resale price maintenance, free-riding

JEL Classification: L42, K21

Suggested Citation

Klein, Benjamin, Competitive Resale Price Maintenance in the Absence of Free-Riding (2009). Antitrust Law Journal, Vol. 76, No. 2, 2009. Available at SSRN: https://ssrn.com/abstract=1656052

Benjamin Klein (Contact Author)

University of California, Los Angeles (UCLA) - Department of Economics ( email )

1999 Avenue of the Stars
Suite 1150
Los Angeles, CA 90067-4628
United States
310-728-2025 (Phone)
310-728-2070 (Fax)

HOME PAGE: http://www.econ.ucla.edu/people/Faculty/Klein.html

Compass Lexecon ( email )

1999 Avenue of the Stars
Suite 1150
Los Angeles, CA 90067-4628
United States
310-728-2025 (Phone)
310-728-2070 (Fax)

HOME PAGE: http://www.compasslexecon.com/professionals/bio?id=152

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