Exclusionary Minimum Resale Price Maintenance
John Asker and
Heski Bar-Isaac ()
No 16564, NBER Working Papers from National Bureau of Economic Research, Inc
An upstream manufacturer can use minimum retail price maintenance (RPM) to exclude potential competitors. RPM lets the incumbent manufacturer transfer profits to retailers. If entry is accommodated, upstream competition leads to fierce down- stream competition and the breakdown of RPM. Hence, via RPM, retailers internalize the effect of accommodating entry on the incumbent's profits. Retailers may prefer not to accommodate entry; and, if entry requires downstream accommodation, entry can be deterred. We investigate when an incumbent would prefer to exclude, rather than collude with, the entrant and the effect of a retailer cartel. We also consider the effect of imperfect competition. Empirical and policy implications are discussed.
JEL-codes: D42 K21 L12 L42 (search for similar items in EconPapers)
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Published as Raising Retailers Pro ts: On Vertical Practices and the Exclusion of Rivals, (with Heski Bar-Isaac), American Economic Review , 104(2), 672-686, 2014.
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Working Paper: Exclusionary Minimum Resale Price Maintenance (2011)
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