Exclusionary Minimum Resale Price Maintenance

50 Pages Posted: 18 Aug 2011  

John Asker

New York University - Leonard N. School of Business - Department of Economics

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 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)

New York University - Leonard N. School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-0062 (Phone)

HOME PAGE: http://pages.stern.nyu.edu/~jasker/

Heski Bar-Isaac

University of Toronto - Rotman School of Management ( email )

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

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

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