Resale Price Maintenance in a Successive Monopoly Model

Markus Dertwinkel‐Kalt and Christian Wey

Journal of Industrial Economics, 2024, vol. 72, issue 2, 729-761

Abstract: We explain why a manufacturer may impose a minimum resale price in a successive monopoly setting. Our argument relies on the retailer having noncontractible choice variables such as the price of a substitute good and/or the retailer's service effort. Our explanation for minimum resale prices is empirically distinguishable from alternative justifications that rely, for instance, on retailer competition and service free riding among retailers. Whether a min RPM benefits or harms consumers depends on its effects: if it softens competition with the substitute product, it tends to harm consumers, and if it secures service provision, it tends to benefit consumers.

Date: 2024
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https://doi.org/10.1111/joie.12368

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Working Paper: Resale price maintenance in a successive monopoly model (2023)
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