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Resale Price Maintenance in a Successive Monopoly Model

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  • Markus Dertwinkel‐Kalt
  • Christian Wey

Abstract

We explain why a manufacturer may impose a minimum resale price in a successive monopoly setting. Our argument relies on the retailer having noncontractible choice variables such as the price of a substitute good and/or the retailer's service effort. Our explanation for minimum resale prices is empirically distinguishable from alternative justifications that rely, for instance, on retailer competition and service free riding among retailers. Whether a min RPM benefits or harms consumers depends on its effects: if it softens competition with the substitute product, it tends to harm consumers, and if it secures service provision, it tends to benefit consumers.

Suggested Citation

  • Markus Dertwinkel‐Kalt & Christian Wey, 2024. "Resale Price Maintenance in a Successive Monopoly Model," Journal of Industrial Economics, Wiley Blackwell, vol. 72(2), pages 729-761, June.
  • Handle: RePEc:bla:jindec:v:72:y:2024:i:2:p:729-761
    DOI: 10.1111/joie.12368
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    References listed on IDEAS

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