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Resale price maintenance and manufacturer competition for retail services

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  • Matthias Hunold
  • Johannes Muthers

Abstract

We investigate the incentives of manufacturers to use resale price maintenance (RPM) when selling products through common retailers. In our model retailers provide product specific pre-sales services. If the competitive retail margins are low, each manufacturer fixes a minimum price to induce favorable retail services. With symmetric manufacturers, products are equally profitable in equilibrium and no product is favored as without RPM, but retail prices are higher. We show that minimum RPM can create a prisoner's dilemma for manufacturers without increasing, and possibly even decreasing the overall service quality. This challenges the service argument as an efficiency defense for RPM.
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Suggested Citation

  • Matthias Hunold & Johannes Muthers, 2017. "Resale price maintenance and manufacturer competition for retail services," RAND Journal of Economics, RAND Corporation, vol. 48(1), pages 3-23, March.
    • Handle: RePEc:bla:randje:v:48:y:2017:i:1:p:3-23
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    File URL: http://hdl.handle.net/10.1111/rand.2017.48.issue-1
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    Cited by:

    1. Herweg, Fabian & Helfrich, Magdalena, 2017. "Salience in Retailing: Vertical Restraints on Internet Sales," CEPR Discussion Papers 11948, C.E.P.R. Discussion Papers.
    2. Martimort, David & Pouyet, Jérôme, 2024. "The Incentive Virtues of Performance-Based Trade Allowances and Loss Leading," TSE Working Papers 24-1564, Toulouse School of Economics (TSE), revised Feb 2026.
    3. Dertwinkel-Kalt, Markus & Köster, Mats, 2020. "Attention to online sales: The role of brand image concerns," DICE Discussion Papers 335, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. Maximilian Maurice Gail & Phil-Adrian Klotz, 2025. "E-book Pricing Under the Agency Model: Lessons from the UK," Journal of Industry, Competition and Trade, Springer, vol. 25(1), pages 1-39, December.
    5. Dertwinkel-Kalt, Markus & Wey, Christian, 2021. "Multi-Product Pricing and Minimum Resale Price Maintenance," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242338, Verein für Socialpolitik / German Economic Association.
    6. Holler, Emanuel & Rickert, Dennis, 2022. "How resale price maintenance and loss leading affect upstream cartel stability: Anatomy of a coffee cartel," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    7. Helfrich, Magdalena & Herweg, Fabian, 2020. "Context-dependent preferences and retailing: Vertical restraints on internet sales," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 87(C).
    8. Herold, Daniel & Lüke, Daniel, 2025. "Resale Price Maintenance And Market Coverage," VfS Annual Conference 2025 (Cologne): Revival of Industrial Policy 325429, Verein für Socialpolitik / German Economic Association.
    9. Morgane Cure & Matthias Hunold & Reinhold Kesler & Ulrich Laitenberger & Thomas Larrieu, 2022. "Vertical integration of platforms and product prominence," Quantitative Marketing and Economics (QME), Springer, vol. 20(4), pages 353-395, December.
    10. Michael R. Baye & Dan Kovenock & Casper G. de Vries, 2025. "Minimum Resale Price Maintenance in the Absence of Point-of-Sale Service, Agency or Free-Rider Problems," Working Papers 25-10, Chapman University, Economic Science Institute.
    11. Amelia Fletcher & Peter L Ormosi & Rahul Savani, 2023. "Recommender Systems and Supplier Competition on Platforms," Journal of Competition Law and Economics, Oxford University Press, vol. 19(3), pages 397-426.
    12. Marc Bourreau & Germain Gaudin, 2022. "Streaming platform and strategic recommendation bias," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(1), pages 25-47, February.
    13. Matthias Hunold & Johannes Muthers, 2023. "Manufacturer Collusion and Resale Price Maintenance," Volkswirtschaftliche Diskussionsbeiträge 197-23, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    14. Matthias Hunold & Johannes Muthers, 2020. "Manufacturer Cartels and Resale Price Maintenance," Economics working papers 2020-06, Department of Economics, Johannes Kepler University Linz, Austria.
    15. Markus Dertwinkel‐Kalt & Christian Wey, 2024. "Resale Price Maintenance in a Successive Monopoly Model," Journal of Industrial Economics, Wiley Blackwell, vol. 72(2), pages 729-761, June.
    16. Matthias Hunold & Reinhold Kesler & Ulrich Laitenberger, 2020. "Rankings of Online Travel Agents, Channel Pricing, and Consumer Protection," Marketing Science, INFORMS, vol. 39(1), pages 92-116, January.
    17. Markus Dertwinkel‐Kalt & Mats Köster, 2022. "Attention to online sales: The role of brand image concerns," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(1), pages 64-89, February.
    18. Luis Aguiar & Imke Reimers & Joel Waldfogel, 2024. "Platforms and the transformation of the content industries," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 33(2), pages 317-326, March.
    19. Maximilian M. Gail & Georg Götz & Daniel Herold & Jan Schäfer, 2025. "Evaluation of a Partial Ban of Rx-Rebates in Germany Using Difference-in-Differences," MAGKS Papers on Economics 202505, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    20. Maruyama, Masayoshi & Zennyo, Yusuke, 2020. "Platform most-favored-customer clauses and investment incentives," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    21. Matthias Hunold & Ulrich Laitenberger & Guillaume Thébaudin, 2022. "Bye-box: An Analysis of Non-Promotion on the Amazon Marketplace 03.06.2022," Working Papers hal-04104183, HAL.
    22. Teis Lunde Lømo & Simen A. Ulsaker, 2021. "Lump‐Sum Payments and Retail Services: A Relational Contracting Perspective," Journal of Industrial Economics, Wiley Blackwell, vol. 69(1), pages 131-168, March.
    23. Hunold, Matthias, 2020. "Manufacturer Cartels and Resale Price Maintenance," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224645, Verein für Socialpolitik / German Economic Association.

    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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