Exclusionary Minimum Resale Price Maintenance
AbstractAn 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 incumbentâs 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.
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Bibliographic InfoPaper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 11-22.
Date of creation: 2011
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Other versions of this item:
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
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