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Resale price maintenance and spatial price discrimination

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  • Heywood, John S.
  • Wang, Shiqiang
  • Ye, Guangliang

Abstract

In this article, we examine resale price maintenance (RPM) in a classic model of downstream retailers engaging in spatial price discrimination. We show that a resale price floor increases the total profit of the upstream monopoly when transport cost (product differentiation) is relatively low. Importantly, this profitable RPM floor can also enhance social welfare and even consumer surplus. A resale price ceiling can also be profitable and always improves consumer surplus and social welfare. We argue that such findings support a rule of reason approach to RPM.

Suggested Citation

  • Heywood, John S. & Wang, Shiqiang & Ye, Guangliang, 2018. "Resale price maintenance and spatial price discrimination," International Journal of Industrial Organization, Elsevier, vol. 57(C), pages 147-174.
    • Handle: RePEc:eee:indorg:v:57:y:2018:i:c:p:147-174
    DOI: 10.1016/j.ijindorg.2018.02.001
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    Cited by:

    1. John S. Heywood & Shiqiang Wang & Guangliang Ye, 2021. "Partial Privatization Upstream with Spatial Price Discrimination Downstream," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 59(1), pages 57-78, August.
    2. Douglas Silveira & Izak Silva & Silvinha Vasconcelos & Fernando Perobelli, 2020. "The Brexit game: uncertainty and location decision," Papers in Regional Science, Wiley Blackwell, vol. 99(6), pages 1515-1538, December.
    3. Wu, Bin & Cheng, Jing & Qi, Yuqing, 2020. "Tripartite evolutionary game analysis for “Deceive acquaintances” behavior of e-commerce platforms in cooperative supervision," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 550(C).
    4. N. M. Rozanova, 2021. "Methodological Issues of Modern Competition Policy," Studies on Russian Economic Development, Springer, vol. 32(5), pages 492-498, September.
    5. John S. Heywood & Dongyang Li & Guangliang Ye, 2020. "Does price discrimination make collusion less likely? a delivered pricing model," Journal of Economics, Springer, vol. 131(1), pages 39-60, September.
    6. Silveira, Douglas & Vasconcelos, Silvinha, 2020. "Essays on duopoly competition with asymmetric firms: Is profit maximization always an evolutionary stable strategy?," International Journal of Production Economics, Elsevier, vol. 225(C).
    7. Heywood, John S. & Wang, Zerong & Ye, Guangliang, 2023. "Spatial price discrimination in a mixed duopoly input market," Regional Science and Urban Economics, Elsevier, vol. 102(C).

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    More about this item

    Keywords

    Resale price maintenance; Price floor; Price ceiling; Spatial price discrimination;
    All these keywords.

    JEL classification:

    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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