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Vertical Information Restraints: Pro- and Anti-Competitive Impacts of Minimum Advertised Price Restrictions

John Asker and Heski Bar-Isaac ()

No 22771, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We consider vertical contracts where the retail market may involve search frictions. Minimum advertised price restrictions (MAP) act as a restraint on customers’ information and so can increase search frictions in the retail sector. Such restraints, thereby, soften retail competition—an impact also generated by resale price maintenance (RPM). However, by accommodating (consumer or retailer) heterogeneity, MAP can allow for higher manufacturer profits than RPM. We show that they can do so through facilitating price discrimination among consumers; encouraging service provision; and facilitating manufacturer collusion. Thus, welfare effects may be positive or negative compared to RPM or to the absence of such restrictions.

JEL-codes: K21 L13 L15 L22 L42 (search for similar items in EconPapers)
Date: 2016-10
New Economics Papers: this item is included in nep-com, nep-ind, nep-law, nep-mic and nep-mkt
Note: IO
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Published as John Asker & Heski Bar-Isaac, 2020. "Vertical Information Restraints: Pro- and Anticompetitive Impacts of Minimum-Advertised-Price Restrictions," The Journal of Law and Economics, vol 63(1), pages 111-148.

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Journal Article: Vertical Information Restraints: Pro- and Anticompetitive Impacts of Minimum-Advertised-Price Restrictions (2020) Downloads
Working Paper: Vertical Information Restraints: Pro- and Anti-Competitive Impacts of Minimum Advertised Price Restrictions (2016) Downloads
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