Resale Price Maintenance and the Service Argument: Efficiency Effects

Wuerzburg Economic Working Paper No. 53

24 Pages Posted: 28 Apr 2005  

Norbert Schulz

University of Wuerzburg - Department of Economics

Date Written: July 2005

Abstract

Proponents of RPM argue that RPM helps to sustain a high level of service at the point of sale and that such a high level is efficient. This paper provides a simple model which leads to the following conclusions: 1) RPM may increase or decrease the level of service. 2) Whether the service level is more efficient under RPM does not depend on the fact that service increases due to RPM. It may be lower under RPM and more efficient. 3) Whether the service level is more efficient depends on the characteristics of the heterogeneous consumers. A feature of the model which deviates from those found in the literature is the introduction of a class of consumers who do not search but decide on a purchase spontaneously.

Keywords: resale price maintenance, service, welfare

JEL Classification: D43, L13, L42

Suggested Citation

Schulz, Norbert, Resale Price Maintenance and the Service Argument: Efficiency Effects (July 2005). Wuerzburg Economic Working Paper No. 53. Available at SSRN: https://ssrn.com/abstract=710221 or http://dx.doi.org/10.2139/ssrn.710221

Norbert Schulz (Contact Author)

University of Wuerzburg - Department of Economics ( email )

Sanderring 2
Lehrstuhl VWL III
D-97070 Wuerzburg
Germany
+49-931/31 29 60 (Phone)
+49-931/31 26 21 (Fax)

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