Resale Price Maintenance: Customer Service Without Free Riding

Charles A. Ingene, Mark E. Parry and Zibin Xu

Journal of Retailing, 2020, vol. 96, issue 4, 563-577

Abstract: Recent judicial legalizations of resale price maintenance (RPM) allow a manufacturer to establish limits to the prices that its retailers charge: a maximum price (a ceiling) or a minimum price (a floor). A manufacturer can also choose not to apply an RPM constraint. To determine how RPM affects service levels and the distribution of profit between channel members, we derive the optimal RPM strategy for a manufacturer that sells through competing retailers who provide their own optimal level of demand-enhancing customer service. Our analysis yields four key insights into a manufacturer's use of RPM in the absence of free riding.

Keywords: Resale price maintenance; Distribution channels; Pricing; Services; Game theory; Legal influences on marketing (search for similar items in EconPapers)
JEL-codes: C72 L42 M31 M38 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jouret:v:96:y:2020:i:4:p:563-577

DOI: 10.1016/j.jretai.2020.05.001

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