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The Role of Price Floor in a Differentiated Product Retail Market

Author

Listed:
  • Barna Bako

    (Faculty of Economics, Corvinus University of Budapest, Fovám tér 8, Budapest, 1093, Hungary)

Abstract

The ability of a manufacturer to enhance competition among its retailers by im- posing a price oor was recently introduced in the literature. The purpose of this article is to revisit this anti-collusive explanation of the retail price maintenance in a more general model in which we introduce asymmetric retailers. We nd that a manufacturer can amplify the retail market's competition by imposing a price oor when retailers sell di erentiated products. This result contradicts the prevailing concept of retail price maintenance.

Suggested Citation

  • Barna Bako, 2010. "The Role of Price Floor in a Differentiated Product Retail Market," Economic Analysis and Policy, Elsevier, vol. 40(3), pages 363-368, December.
    • Handle: RePEc:eee:ecanpo:v:40:y:2010:i:3:p:363-368
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    More about this item

    Keywords

    Retail price maintenance; Price floor; Collusion;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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