The Competitive Effects of Resale Price Maintenance

Thomas W. Gilligan

RAND Journal of Economics, 1986, vol. 17, issue 4, 544-556

Abstract: Resale price maintenance (RPM) occurs when an upstream firm dictates pricing policies at subsequent stages of the distribution process. The allocative and productive effects of RPM are theoretically ambiguous, and existing empirical studies have not resolved the theoretical disputes. Utilizing the share price response of firms subject to antitrust challenges to RPM, the empirical analysis in this article indicates that this practice is used for a variety of reasons and produces a range of allocative and productive effects. The analysis also indicates that the structural characteristics of firms and industries that use RPM are important determinants of its effects. These results have implications for the theory of vertical control and for interpreting recommendations about the conduct of contemporary antitrust policy toward RPM.

Date: 1986
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