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Does the Service Argument Justify Resale Price Maintenance?

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  • Schulz, Norbert

Abstract

Proponents of RPM argue that RPM helps to sustain a high level of service at the point of sale and that such a high level is efficient. This paper provides a simple model which leads to the following conclusions: 1) RPM may increase or decrease the level of service. 2) Whether the service level is more efficient under RPM does not depend on the fact that service increases due to RPM. It may be lower under RPM and more efficient. 3) Whether the service level is more efficient depends on the characteristics of the heterogeneous consumers. A feature of the model which deviates from those found in the literature is the introduction of a class of consumers who do not search but decide on a purchase spontaneously.

Suggested Citation

  • Schulz, Norbert, 2006. "Does the Service Argument Justify Resale Price Maintenance?," W.E.P. - Würzburg Economic Papers 70, University of Würzburg, Department of Economics.
    • Handle: RePEc:zbw:wuewep:70
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    More about this item

    Keywords

    resale price maintenance; quality; efficiency;
    All these keywords.

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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