Exclusionary Minimum Resale Price Maintenance

50 Pages Posted: 18 Aug 2011

See all articles by John Asker

John Asker

UCLA

Heski Bar-Isaac

University of Toronto - Rotman School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: September 2012

Abstract

An upstream manufacturer can use minimum resale price maintenance (RPM) to exclude potential competitors. RPM lets the incumbent manufacturer transfer profits to retailers. If entry is accommodated, upstream competition leads to fierce down-stream competition and the breakdown of RPM. Hence, via RPM, retailers internalize the effect of accommodating entry on the incumbent's profits. Retailers may prefer not to accommodate entry; and, if entry requires downstream accommodation, entry can be deterred. We also discuss empirical and policy implications, as well as the exclusion-ary potential of other methods of sharing prots between upstream and downstream firms, such as slotting fees and revenue sharing.

Suggested Citation

Asker, John William and Bar-Isaac, Heski, Exclusionary Minimum Resale Price Maintenance (September 2012). NYU Working Paper No. 2451/31609, Available at SSRN: https://ssrn.com/abstract=1911714

John William Asker (Contact Author)

UCLA ( email )

8283 Bunche Hall
Los Angeles, CA 90095-1477
United States

Heski Bar-Isaac

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416 978 3626 (Phone)

HOME PAGE: http://https://sites.google.com/site/heskibarisaac/home

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