Resale Price Maintenance under Asymmetric Information
AbstractWe study Resale Price Maintenance (RPM) in a successive monopolies framework with adverse selection and moral hazard. The analysis compares both the private and the wel- fare properties of vertical contracts based on retail price restrictions with those derived under quantity .xing arrangements (QF). With information asymmetries, both types of vertical contracts entail a double marginalization driven by the presence of information rents, distributed to a privately informed downstream retailer, which forces the upstream producer to sell above its marginal costs. When .rms behave non-cooperatively, the up- stream producer always prefers RPM to QF, and the impact of RPM on consumers. surplus is ambiguous. With joint-pro.ts maximizing contracts, instead, whenever RPM maximizes constrained joint-pro.ts it also raises consumers.surplus, thereby producing a Pareto improvement relative to QF contracts.
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Bibliographic InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 107.
Date of creation: 01 Oct 2003
Date of revision: 01 Apr 2007
Publication status: Published in International Journal of Industrial Organization, 2007, vol. 25, pages 315-339
Other versions of this item:
- Martimort, David & Piccolo, Salvatore, 2007. "Resale price maintenance under asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 25(2), pages 315-339, April.
- NEP-ALL-2003-10-20 (All new papers)
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