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Minimum resale price maintenance can reduce prices

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  • Burgdorf, Jacob
  • Sacks, Michael

Abstract

Theories suggesting that minimum resale price maintenance (RPM) is pro-competitive typically rely on inducing costly investments by downstream firms that are valued by consumers. We present a model in which minimum RPM can be implemented by an upstream monopolist with many downstream retailers that benefits consumers independent of the provision of complementary services or inventory effects. Minimum RPM disrupts coordination by downstream firms that sustains the monopoly price, leading to lower retail prices and higher retail quantities. Counter-intuitively, therefore, a binding minimum resale price can reduce retail prices, which increases consumer surplus and can also increase aggregate producer surplus.

Suggested Citation

  • Burgdorf, Jacob & Sacks, Michael, 2026. "Minimum resale price maintenance can reduce prices," Economics Letters, Elsevier, vol. 264(C).
    • Handle: RePEc:eee:ecolet:v:264:y:2026:i:c:s0165176526001382
    DOI: 10.1016/j.econlet.2026.112944
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