On the Nonequivalence of Maximum Resale Price Maintenance and Vertical Integration

James Hamilton and Nancy Philippart

Eastern Economic Journal, 1987, vol. 13, issue 4, 411-419

Abstract: Maximum resale price maintenance (RPM) and vertical integration are compared without making the usual assumption that the supplier is a pure monopoly. Then, contrary to the pure monopoly analysis, maximum RPM is not in general a contractual equivalent of vertical integration. Without a pure monopoly, when maximum RPM is profitable, it would increase welfare, while profitable vertical integration generally would reduce it. The supplier generally would realize more profit, however, by using maximum RPM rather than vertical integration.

Date: 1987
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