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The effects of advertising on resale price maintenance

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  • Miao-Ling Chen
  • Guan-Ru Chen

Abstract

This research combines the market power and market competition perspectives on advertising, under the framework of a generalized theoretical model in minimum resale price maintenance (RPM), in order to investigate the effects of advertising on RPM using the real options approach. The effects of advertising on retail price will impact the value of RPM, further, influence the incentive of manufacturers to impose RPM. Through brand penetration and promotional pricing effects, advertising is likely to influence RPM under the condition of retail price competition. When the brand penetration effect is dominant, advertising will discourage manufacturers from imposing RPM. Advertising will encourage manufacturers to impose RPM when the promotional pricing effect is dominant. RPM not only substitutes advertising, but also complements advertising.

Suggested Citation

  • Miao-Ling Chen & Guan-Ru Chen, 2007. "The effects of advertising on resale price maintenance," Applied Economics, Taylor & Francis Journals, vol. 39(4), pages 453-459.
    • Handle: RePEc:taf:applec:v:39:y:2007:i:4:p:453-459
    DOI: 10.1080/00036840500438863
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    Cited by:

    1. 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.

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