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Retailer Heterogeneity, Intra-Brand Competition and Social Welfare

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  • Hao Wang

Abstract

This paper considers a model where a manufacturer sells its product to consumers through competitive retailers who are heterogeneous in marginal distribution costs and geographic locations. We study the welfare implications of resale price maintenance (RPM), which eliminates the intra-brand competition. We show that with RPM, the manufacturer can make more profit at the cost of the consumers. RPM helps the high-cost retailers to stay competitive in the market, and therefore increases the total distribution cost of the society. We suggest that antitrust authorities should be concerned when intra-brand competition is lessened. Copyright Springer Science + Business Media, Inc. 2005

Suggested Citation

  • Hao Wang, 2005. "Retailer Heterogeneity, Intra-Brand Competition and Social Welfare," Journal of Industry, Competition and Trade, Springer, vol. 5(2), pages 87-97, June.
    • Handle: RePEc:kap:jincot:v:5:y:2005:i:2:p:87-97
    DOI: 10.1007/s10842-005-3720-2
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    References listed on IDEAS

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