Resale Price Maintenance in a Successive Monopoly Model

44 Pages Posted: 18 Feb 2021 Last revised: 4 Nov 2022

See all articles by Markus Dertwinkel-Kalt

Markus Dertwinkel-Kalt

University of Münster

Christian Wey

University of Düsseldorf - Düsseldorf Institute for Competition Economics (DICE)

Date Written: October 2022

Abstract

We present a model to explain why a manufacturer may choose to impose a minimum resale price (min RPM) in a successive monopoly setting. Our argument relies on the retailer having non-contractible choice variables, which could represent the price of a substitute good and/or the effort the retailer exerts for service provision or advertising. Our explanation for a min RPM is empirically distinguishable from alternative justifications for a min RPM that rely, for instance, on retailer competition and service free riding among retailers. Whether a min RPM benefits or harms consumers depends on - as we show - why a min RPM is implemented: if the goal is to soften competition with the substitute product, it tends to harm consumers, and if the goal is to secure service provision, it tends to benefit consumers.

Keywords: Resale Price Maintenance, Vertical Restraints, Retailing

JEL Classification: L12, L41, D42, K21

Suggested Citation

Dertwinkel-Kalt, Markus and Wey, Christian, Resale Price Maintenance in a Successive Monopoly Model (October 2022). Available at SSRN: https://ssrn.com/abstract=3764435 or http://dx.doi.org/10.2139/ssrn.3764435

Markus Dertwinkel-Kalt (Contact Author)

University of Münster ( email )

Universitätsstraße 14-16
Münster, 48143
Germany

Christian Wey

University of Düsseldorf - Düsseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany
+49-211-81-15009 (Phone)
+49-211-81-15499 (Fax)

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