Resale Price Maintenance under Asymmetric Information

Salvatore Piccolo () and David Martimort

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We study Resale Price Maintenance (RPM) in a successive monopolies framework with adverse selection and moral hazard. The analysis compares both the private and the wel- fare properties of vertical contracts based on retail price restrictions with those derived under quantity .xing arrangements (QF). With information asymmetries, both types of vertical contracts entail a double marginalization driven by the presence of information rents, distributed to a privately informed downstream retailer, which forces the upstream producer to sell above its marginal costs. When .rms behave non-cooperatively, the up- stream producer always prefers RPM to QF, and the impact of RPM on consumers. surplus is ambiguous. With joint-pro.ts maximizing contracts, instead, whenever RPM maximizes constrained joint-pro.ts it also raises consumers.surplus, thereby producing a Pareto improvement relative to QF contracts.

Date: 2003-10-01, Revised 2007-04-01
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Published in International Journal of Industrial Organization, 2007, vol. 25, pages 315-339

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Journal Article: Resale price maintenance under asymmetric information (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:107

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