Resale Price Maintenance and Horizontal Cartel

Patrick Rey and Thibaud Vergé

The Centre for Market and Public Organisation from The Centre for Market and Public Organisation, University of Bristol, UK

Abstract: Whereas non-price restrictions such as exclusive territories are often tolerated while Resale Price Maintenance (RPM) is rather unanimously forbidden, the economic analysis shows so far that both types of restraints have positive and negative effects on welfare, in such a way that the balance is not clearly in favour of non-price restrictions. An often expressed idea to justify the courts' decisions against RPM is that it can limit both inter- and intra-brand competition. This paper analyses this argument in a context where manufacturers and retailers have interlocking relationships. It is shown that even as part of purely bilateral vertical contracts, RPM indeed limits the exercise of both inter- an intra-brand competition and can even generate industry-wide monopoly pricing. The final impact on prices depends on the substituability between retailers and between manufacturers, and on the extent of potential competition at the retail level.

Keywords: resale price maintenance; collusion; successive duopoly (search for similar items in EconPapers)
JEL-codes: D4 L13 L41 L42 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2002-02
New Economics Papers: this item is included in nep-com and nep-mfd
References: View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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