Resale price maintenance and spatial price discrimination

John Heywood, Shiqiang Wang and Guangliang Ye

International Journal of Industrial Organization, 2018, vol. 57, issue C, 147-174

Abstract: In this article, we examine resale price maintenance (RPM) in a classic model of downstream retailers engaging in spatial price discrimination. We show that a resale price floor increases the total profit of the upstream monopoly when transport cost (product differentiation) is relatively low. Importantly, this profitable RPM floor can also enhance social welfare and even consumer surplus. A resale price ceiling can also be profitable and always improves consumer surplus and social welfare. We argue that such findings support a rule of reason approach to RPM.

Keywords: Resale price maintenance; Price floor; Price ceiling; Spatial price discrimination (search for similar items in EconPapers)
JEL-codes: L12 L42 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:57:y:2018:i:c:p:147-174

DOI: 10.1016/j.ijindorg.2018.02.001

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