Exclusionary Minimum Resale Price Maintenance

47 Pages Posted: 6 Dec 2010 Last revised: 6 Apr 2023

See all articles by John Asker

John Asker

UCLA

Heski Bar-Isaac

University of Toronto - Rotman School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: December 2010

Abstract

An upstream manufacturer can use minimum retail price maintenance (RPM) to exclude potential competitors. RPM lets the incumbent manufacturer transfer profits to retailers. If entry is accommodated, upstream competition leads to fierce down- stream competition and the breakdown of RPM. Hence, via RPM, retailers internalize the effect of accommodating entry on the incumbent's profits. Retailers may prefer not to accommodate entry; and, if entry requires downstream accommodation, entry can be deterred. We investigate when an incumbent would prefer to exclude, rather than collude with, the entrant and the effect of a retailer cartel. We also consider the effect of imperfect competition. Empirical and policy implications are discussed.

Suggested Citation

Asker, John William and Bar-Isaac, Heski, Exclusionary Minimum Resale Price Maintenance (December 2010). NBER Working Paper No. w16564, Available at SSRN: https://ssrn.com/abstract=1719925

John William Asker (Contact Author)

UCLA ( email )

8283 Bunche Hall
Los Angeles, CA 90095-1477
United States

Heski Bar-Isaac

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416 978 3626 (Phone)

HOME PAGE: http://https://sites.google.com/site/heskibarisaac/home

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