Resale Price Maintenance and Collusion

Patrick Rey and Bruno Jullien

No 2553, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The paper revisits the conventional wisdom according to which vertical restrictions on retail prices help upstream firms to collude. We analyse the scope for collusion with and without resale price maintenance (RPM) when retailers observe local shocks on demand or retail costs. In the absence of RPM, retail prices react to retailers' information and deviations from collusive behaviour are thus difficult to detect. By eliminating retail price flexibility, RPM facilitates the detection of deviations but reduces profits and increases the short-run gains from a deviation. Overall, RPM can facilitate collusion and it reduces total welfare whenever firms choose to adopt it.

Keywords: Collusion; Resale price maintenance; Antitrust; Vertical restraints (search for similar items in EconPapers)
JEL-codes: K21 L13 L41 L42 (search for similar items in EconPapers)
Date: 2000-09
References: Add references at CitEc
Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Resale price maintenance and collusion (2007)
Working Paper: Resale Price Maintenance and Collusion (2000)
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