DEMAND UNCERTAINTY AND RESALE PRICE MAINTENANCE
David Flath () and
Contemporary Economic Policy, 2000, vol. 18, issue 4, 397-403
When retailers must commit to shipment quantities prior to resolution of demand uncertainty, manufacturer stipulation of a minimum retail price is likely to be profitable for the manufacturer and not damaging to the retailers. The reason is simple: if demand turns out to be low, the unfettered market‐clearing price can lie below the price that maximizes total sales revenue. A minimum retail price that is binding in the low‐demand state can thus increase total revenue even though it saddles retailers with unsold merchandise. The ubiquity of full reimbursement for returns in Japan, even though it is in theory merely a second‐best way of achieving minimum retail price stipulations, reveals important aspects of manufacturer maintenance of retail prices having to do with enforcement problems, the allocation of risk‐bearing, and economic incentives. These aspects of resale price maintenance (RPM) are relevant to the normative evaluation of the special exemptions for RPM that Japan's Fair Trade Commission has long maintained but is now phasing out.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:coecpo:v:18:y:2000:i:4:p:397-403
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1074-3529
Access Statistics for this article
Contemporary Economic Policy is currently edited by Brad R. Humphreys
More articles in Contemporary Economic Policy from Western Economic Association International Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().