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Resale Price Maintenance: Output Increasing or Restricting? The Case of Distilled Spirits in the United States

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  • Ornstein, Stanley I
  • Hanssens, Dominique M

Abstract

Theories of resale price maintenance (RPM) differ strongly on the pro- and a nti-competitive effects on RPM. There are few tests of the welfare ga ins or losses from RPM in industry case studies. This paper tests RPM 's welfare effects in the retail sale of distilled spirits in the U.S Using regression analysis to estimate demand, comparing liquor stor e license values over time, and analyzing political contributions, th e study finds that efficiency arguments for RPM are unsupported, with RPM leading to a reduction in distilled spirits consumption. Evidenc e shows substantial wealth transfers from consumers to retail liquor store owners due to RPM. Copyright 1987 by Blackwell Publishing Ltd.

Suggested Citation

  • Ornstein, Stanley I & Hanssens, Dominique M, 1987. "Resale Price Maintenance: Output Increasing or Restricting? The Case of Distilled Spirits in the United States," Journal of Industrial Economics, Wiley Blackwell, vol. 36(1), pages 1-18, September.
    • Handle: RePEc:bla:jindec:v:36:y:1987:i:1:p:1-18
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    Citations

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    Cited by:

    1. David Flath, 2016. "Resale Price Maintenance by Japanese Newspapers," The Japanese Economic Review, Springer, vol. 67(4), pages 441-473, December.
    2. Danial Asmat & Chenyu Yang, 2019. "An Empirical Analysis of Minimum Advertised Price Restrictions," Working Papers 19-07, NET Institute.
    3. Kawaguchi, Kohei & Qiu, Jeff & Zhang, Yi, 2022. "Competitive Effects of Resale Price Maintenance Through Inventory: Evidence from Publishing Industry," SocArXiv wma6p, Center for Open Science.
    4. Jonathan Beck, 2004. "Fixed, Focal, Fair? Book Prices Under Optional Resale Price Maintenance," CIG Working Papers SP II 2004-15, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    5. Bakó, Barna & Kálecz-Simon, András, 2012. "Vertikális korlátozások - növelik vagy csökkentik a jólétet?. Érvek az irodalomból [Vertical constraints - do they increase or reduce welfare?. Arguments in the literature]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 1138-1159.
    6. Tenn, Steven & Yun, John M., 2008. "Biases in demand analysis due to variation in retail distribution," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 984-997, July.
    7. Xiao, Ping & (Jack) Chen, Xinlei & Chen, Yuxin & Lu, Wei, 2021. "Violation behavior in vertical restraint: Empirical analyses in the case of retail price maintenance," International Journal of Research in Marketing, Elsevier, vol. 38(4), pages 953-973.
    8. Jacob Burgdorf, 2021. "The strategic impact of voluntary vs. mandated vertical restraints and termination restrictions on exclusion of rivals," Journal of Regulatory Economics, Springer, vol. 59(1), pages 94-107, February.
    9. Hao Wang, 2005. "Retailer Heterogeneity, Intra-Brand Competition and Social Welfare," Journal of Industry, Competition and Trade, Springer, vol. 5(2), pages 87-97, June.
    10. John Asker & Heski Bar-Isaac, 2010. "Exclusionary Minimum Resale Price Maintenance," NBER Working Papers 16564, National Bureau of Economic Research, Inc.
    11. Jürgen-Peter Kretschmer, 2014. "How to deal with resale price maintenance: What can we learn from empirical results?," European Journal of Law and Economics, Springer, vol. 38(2), pages 343-368, October.
    12. Emanuele Giovannetti & Laura Magazzini, 2013. "Resale Price Maintenance: An Empirical Analysis of UK Firms' Compliance," Economic Journal, Royal Economic Society, vol. 123(11), pages 582-595, November.
    13. Benjamin Klein, 2014. "The Evolving Law and Economics of Resale Price Maintenance," Journal of Law and Economics, University of Chicago Press, vol. 57(S3), pages 161-179.
    14. Julian Simon & David Simon, 1996. "The effects of regulations on state liquor prices," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 23(3), pages 303-316, October.

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