Resale price maintenance and manufacturer competition for retail services

Matthias Hunold and Johannes Muthers

No 12-028, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We investigate the incentives of manufacturers to use resale price maintenance (RPM) when selling products through common retailers. In our model retailers provide product specific pre-sales services. If the competitive retail margins are low, each manufacturer fixes a minimum price to induce favorable retail services. With symmetric manufacturers, products are equally profitable in equilibrium and no product is favored as without RPM, but retail prices are higher. We show that minimum RPM can create a prisoner's dilemma for manufacturers without increasing, and possibly even decreasing the overall service quality. This challenges the service argument as an efficiency defense for RPM.

Keywords: biased sales advice; common agency; manufacturer dilemma; matching; retail service; RPM; vertical restraints (search for similar items in EconPapers)
JEL-codes: D83 L42 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-com and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Resale price maintenance and manufacturer competition for retail services (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:12028

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