Resale Price Maintenance: An Economic Assessment of the Federal Trade Commission's Case against the Corning Glass Works

Pauline M Ippolito and Overstreet, Thomas R,

Journal of Law and Economics, 1996, vol. 39, issue 1, 285-328

Abstract: This article examines the economic explanations for the use of resale price maintenance (RPM) by the Corning Glass Works, using empirical evidence developed from the Federal Trade Commission's case challenging the practice. Three classes of RPM theories are tested: the supplier and dealer anticompetitive theories, and the class of principle-agent theories. The article uses both ex ante and ex post tests to distinguish the theories, including tests based on structural evidence, as well as data on sales, advertising and stock market reactions for the company and its competitors around critical events in the case. The evidence most convincingly rejects the anticompetitive theories and points toward a principle-agent explanation in which RPM helped increase sales of Corning's products. The case is of interest, in part, because the "simple" products at issue in the case are not the types of products most often associated with potential efficiency explanations for RPM. Copyright 1996 by the University of Chicago.

Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlawec:v:39:y:1996:i:1:p:285-328

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