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 minimum resale price mainte-nance (RPM). In our model some consumers are fully informed about downstream prices while other consumers are not. When an upstream manufacturer imposes a floor on downstream prices, this changes not just the level of downstream prices but also their dispersion. The manufacturer optimally imposes a price floor which just eliminates all downstream price dispersion, and this leads to both higher (aggre-gate) consumer surplus and higher total welfare as compared to the case without RPM. We also show that when downstream entry is costly, minimum RPM can outperform maximum RPM.

Keywords: Resale price maintenance; consumer search; price dispersion (search for similar items in EconPapers)
Date: 2025-12-05, Revised 2026-06
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