The Economics and Public Policy of Resale Price Maintenance

Kwang Shik Shin
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Kwang Shik Shin: University of Ulsan

Korean Economic Review, 1990, vol. 6, issue 1, 203-215

Abstract: This paper reviews the current economic theories and the available empirical evidence concerning vertical price restraints. In light of this review, the antitrust ramifications of RPM are drawn and the appropriateness of the current legal treatment of the practice is assessed. The current policy of prohibiting RPM as per se illegal while allowing certain exceptions to the general rule appears to-be unnecessarily costly when evaluated in terms of economic efficiency. Failure to make express allowances for the informational role of distribution systems is doubtlessly what leads to public policy error in this area. The uncritical extension of competitive reasoning from horizontal restraint of trade to vertical price control should be abandoned and the efficiency gains from RPM should be acknowledged by the law.

Date: 1990
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