Resale Price Maintenance and Consumer Search

Andrew Rhodes and Yang Yang
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Andrew Rhodes: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Yang Yang: Unknown

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Abstract: We provide a novel pro-competitive rationale for resale price maintenance (RPM). ,We consider a model where some consumers are fully informed about downstream prices while other consumers are not. When an upstream manufacturer imposes a floor on downstream prices, this qualitatively changes downstream competition— influencing not just the level, but also the dispersion, of prices. The manufacturer optimally imposes a price floor which just eliminates all downstream price dispersion, and this leads to both higher (aggregate) consumer surplus and higher total welfare as compared to the case without RPM.

Keywords: Resale price maintenance; consumer search; price dispersion (search for similar items in EconPapers)
Date: 2026-01-30
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