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Resale Price Maintenance or Dealer Exclusive Territories? Toward a Theory of Product Distribution

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  • David W. Boyd

Abstract

A theory of product distribution is presented by examining a manufacturer's choice between resale price maintenance (RPM) and dealer exclusive territories to solve the standard retail free riding problem. The choice depends critically on the life cycle of the product being distributed: manufacturers of products with long life cycles are more likely to distribute their products with exclusive territories, with RPM becoming more probable as the life cycle of the product shrinks. These results provide a link between a product's characteristics and the likely manner in which it is offered at retail.

Suggested Citation

  • David W. Boyd, 1996. "Resale Price Maintenance or Dealer Exclusive Territories? Toward a Theory of Product Distribution," The American Economist, Sage Publications, vol. 40(2), pages 86-94, October.
    • Handle: RePEc:sae:amerec:v:40:y:1996:i:2:p:86-94
    DOI: 10.1177/056943459604000211
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    References listed on IDEAS

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    1. Howard P. Marvel & Stephen McCafferty, 1984. "Resale Price Maintenance and Quality Certification," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 346-359, Autumn.
    2. Laband, David N, 1986. "Advertising as Information: An Empirical Note," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 517-521, August.
    3. Marvel, Howard P & McCafferty, Stephen, 1986. "The Political Economy of Resale Price Maintenance," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1074-1095, October.
    4. G.F. Mathewson & R.A. Winter, 1984. "An Economic Theory of Vertical Restraints," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 27-38, Spring.
    5. Marvel, H.P. & McCafferty, S., 1991. "Comparing Vertical Restraints," ISER Discussion Paper 0241, Institute of Social and Economic Research, Osaka University.
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