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Rendering Alternative Offerings Less Profitable with Resale Price Maintenance

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  • Greg Shaffer

Abstract

When it was legal, resale price maintenance (RPM) was commonly observed on items such as aspirin, pens, pencils, toothpaste, soap, shaving cream, and milk. In providing a theory that is based on compensating retailers for their opportunity cost of shelf space, and that does not hinge on the existence of externalities in nonprice competition, this article explains why a manufacturer might impose RPM on these and many other products. By contrast, the use of RPM on food, grocery, and drug store items is not easily explained by standard theories such as free riding on presale services and quality certification by high‐priced retailers. The typical supermarket has room for fewer than 25,000 products. Yet there are some 100,000 available, and between 10,000 and 25,000 items aye introduced each year.1

Suggested Citation

  • Greg Shaffer, 1994. "Rendering Alternative Offerings Less Profitable with Resale Price Maintenance," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(4), pages 639-662, December.
    • Handle: RePEc:bla:jemstr:v:3:y:1994:i:4:p:639-662
    DOI: 10.1111/j.1430-9134.1995.00639.x
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    References listed on IDEAS

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    1. Pickering, J F, 1974. "The Abolition of Resale Price Maintenance in Great Britain," Oxford Economic Papers, Oxford University Press, vol. 26(1), pages 120-146, March.
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    7. Greg Shaffer, 1991. "Slotting Allowances and Resale Price Maintenance: A Comparison of Facilitating Practices," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 120-135, Spring.
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    Cited by:

    1. Reiffen, David, 1999. "On the equivalence of resale price maintenance and quantity restrictions," International Journal of Industrial Organization, Elsevier, vol. 17(2), pages 277-288, February.

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