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Oligopoly Price Discrimination and Resale Price Maintenance

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  • Yongmin Chen

Abstract

Oligopoly price discrimination in the retail market prevents a manufacturer from inducing optimal retail margins through any wholesale price. This motivates the manufacturer to impose resale price maintenance. In a model of third-degree price discrimination by rival retailers, a retail price ceiling (or floor) enables the manufacturer to restore the first best. Imposing a fixed retail price is generally not optimal because the manufacturer wants to eliminate price discrimination based on consumers' abilities to switch retailers, not based on consumers' valuations. Under resale price maintenance, welfare may either increase or decrease, and it may increase even when total output is reduced.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 30 (1999)
Issue (Month): 3 (Autumn)
Pages: 441-455

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Handle: RePEc:rje:randje:v:30:y:1999:i:autumn:p:441-455

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Cited by:
  1. Feenstra, Robert C. & Huang, Deng-Shing & Hamilton, Gary G., 2003. "A market-power based model of business groups," Journal of Economic Behavior & Organization, Elsevier, vol. 51(4), pages 459-485, August.
  2. Kenji, Matsui, 2011. "Resale price maintenance for supply chains distributing products with demand uncertainty," International Journal of Production Economics, Elsevier, vol. 134(2), pages 375-387, December.
  3. Reisinger, Markus & Schnitzer, Monika, 2008. "A Model of Vertical Oligopolistic Competition," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 228, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  4. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, Elsevier.
  5. Kálecz-Simon, András & Bakó, Barna, 2012. "Vertikális korlátozások - növelik vagy csökkentik a jólétet?. Érvek az irodalomból
    [Vertical constraints - do they increase or reduce welfare?. Arguments in the literature]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 1138-1159.
  6. David Andrés Camargo Mayorga & Johan Ricardo Páez Castillo & Ángel David Roncancio García, 2010. "Consideraciones teóricas y empíricas acerca del Resale Price Maintenance," REVISTA FACULTAD DE CIENCIAS ECONÓMICAS, UNIVERSIDAD MILITAR NUEVA GRANADA.

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