Resale Price Maintenance and Manufacturer Competition for Exclusive Dealerships

Martin K Perry and David Besanko

Journal of Industrial Economics, 1991, vol. 39, issue 5, 517-44

Abstract: Two manufacturers distribute their brands through exclusive retail dealers and must compete for consumers indirectly by inducing retailers to carry their brands. The authors compare equilibrium outcomes with and without resale price maintenance. Maximum resale price maintenance lowers the retail price if manufacturers cannot employ franchise fees. Minimum retail price maintenance raises the retail price if manufacturers cannot set a wholesale price above marginal cost and must employ only a franchise fee. However, these traditional insights are reversed if manufacturers can set both a wholesale price and a franchise fee in the equilibrium without retail price maintenance. Copyright 1991 by Blackwell Publishing Ltd.

Date: 1991
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