The Empirical Effects of Minimum Resale Price Maintenance

MacKay, Alexander; Smith, David

doi:10.2139/ssrn.2513533

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The Empirical Effects of Minimum Resale Price Maintenance

Kilts Center for Marketing at Chicago Booth – Nielsen Dataset Paper Series 2-006

54 Pages Posted: 24 Oct 2014 Last revised: 15 Nov 2014

See all articles by Alexander MacKay

Alexander MacKay

University of Virginia - Department of Economics

David Smith

Analysis Group

Date Written: June 16, 2014

Abstract

This study is the first to estimate the empirical effects of minimum resale price maintenance (RPM) across a broad variety of products. We analyze conflicting theories using an exogenous state-level law change resulting from the 2007 Leegin Supreme Court decision. In states where RPM contracts are treated under the more relaxed rule-of-reason standard, prices increased. We estimate the welfare impact and find that, in aggregate, consumers are worse off in the rule-of-reason states. Though welfare decreased and prices increased, we find little support for the broad application of any particular theory.

Keywords: Leegin, Resale Prince Maintenance

JEL Classification: L42, D22, L10, D40, K21

Suggested Citation: Suggested Citation

MacKay, Alexander and Smith, David, The Empirical Effects of Minimum Resale Price Maintenance (June 16, 2014). Kilts Center for Marketing at Chicago Booth – Nielsen Dataset Paper Series 2-006, Available at SSRN: https://ssrn.com/abstract=2513533 or http://dx.doi.org/10.2139/ssrn.2513533