Resale Price Maintenance and Consumer Search

Andrew Rhodes and Yang Yang

No 25-1695, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We provide a novel pro-competitive rationale for resale price maintenance (RPM). We consider a model where some consumers are fully informed about downstream prices while other consumers are not. When an upstream manufacturer imposes a floor on downstream prices, this qualitatively changes downstream competition— influencing not just the level, but also the dispersion, of prices. The manufacturer optimally imposes a price floor which just eliminates all downstream price dispersion, and this leads to both higher (aggregate) consumer surplus and higher total welfare as compared to the case without RPM.

Date: 2025-12-05
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