IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v134y2011i2p375-387.html
   My bibliography  Save this article

Resale price maintenance for supply chains distributing products with demand uncertainty

Author

Listed:
  • Kenji, Matsui

Abstract

This paper explores the economic roles of resale price maintenance (RPM) in supply chains for a specific product, when consumers have taste heterogeneity and the manufacturer faces demand uncertainty. Two transaction schemes within supply chains are compared: (1) RPM, and (2) decentralized pricing in a competitive market environment. With decentralized pricing, a manufacturer loses the incentive to produce a product in categories where the probability that the manufacturer fails to design the product as suitable to public tastes of consumers is high. However, RPM resolves the problem and induces the manufacturer to supply the good, bringing positive surplus to consumers.

Suggested Citation

  • Kenji, Matsui, 2011. "Resale price maintenance for supply chains distributing products with demand uncertainty," International Journal of Production Economics, Elsevier, vol. 134(2), pages 375-387, December.
    • Handle: RePEc:eee:proeco:v:134:y:2011:i:2:p:375-387
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925527309004113
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Perry, Martin K. & Porter, Robert H., 1990. "Can resale price maintenance and franchise fees correct sub-optimal levels of retail service?," International Journal of Industrial Organization, Elsevier, vol. 8(1), pages 115-141.
    2. Martin K. Perry & Robert H. Groff, 1985. "Resale Price Maintenance and Forward Integration into a Monopolistically Competitive Industry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1293-1311.
    3. Miao-Ling Chen & Guan-Ru Chen, 2007. "The effects of advertising on resale price maintenance," Applied Economics, Taylor & Francis Journals, vol. 39(4), pages 453-459.
    4. Severin Borenstein, 1991. "Selling Costs and Switching Costs: Explaining Retail Gasoline Margins," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 354-369, Autumn.
    5. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    6. Kenji Matsui, 2010. "Effects of wholesaler concentration on retailers by format: evidence from Japanese brand-level price data," Applied Economics, Taylor & Francis Journals, vol. 42(18), pages 2379-2391.
    7. Raymond Deneckere & Howard P. Marvel & James Peck, 1996. "Demand Uncertainty, Inventories, and Resale Price Maintenance," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(3), pages 885-913.
    8. Ralph A. Winter, 1993. "Vertical Control and Price Versus Nonprice Competition," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(1), pages 61-76.
    9. Frank Mathewson & Ralph Winter, 1998. "The Law and Economics of Resale Price Maintenance," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 13(1), pages 57-84, April.
    10. D Flath & T Nariu*, 2000. "Demand Uncertainty And Resale Price Maintenance," Contemporary Economic Policy, Western Economic Association International, vol. 18(4), pages 397-403, October.
    11. Harish Krishnan & Ralph A. Winter, 2007. "Vertical Control of Price and Inventory," American Economic Review, American Economic Association, vol. 97(5), pages 1840-1857, December.
    12. Norbert Schulz, 2007. "Does the Service Argument Justify Resale Price Maintenance?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(2), pages 236-255, June.
    13. J. Isaac Brannon, 2003. "The effects of resale price maintenance laws on petrol prices and station attrition: empirical evidence from Wisconsin," Applied Economics, Taylor & Francis Journals, vol. 35(3), pages 343-349.
    14. William Comanor & Patrick Rey, 1997. "Competition Policy towards Vertical Restraints in Europe and the United States," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 24(1), pages 37-52, January.
    15. Howard P. Marvel & Stephen McCafferty, 1984. "Resale Price Maintenance and Quality Certification," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 346-359, Autumn.
    16. G.F. Mathewson & R.A. Winter, 1984. "An Economic Theory of Vertical Restraints," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 27-38, Spring.
    17. Klein, Benjamin & Murphy, Kevin M, 1988. "Vertical Restraints as Contract Enforcement Mechanisms," Journal of Law and Economics, University of Chicago Press, vol. 31(2), pages 265-297, October.
    18. Rey, Patrick & Tirole, Jean, 1986. "The Logic of Vertical Restraints," American Economic Review, American Economic Association, vol. 76(5), pages 921-939, December.
    19. Kenn Ariga, 1995. "Economics of Japan's Retail Stores," Japanese Economy, Taylor & Francis Journals, vol. 23(1), pages 66-96.
    20. Flath, David, 1989. "Vertical restraints in Japan," Japan and the World Economy, Elsevier, vol. 1(2), pages 187-203, March.
    21. Patrick Bolton & Giacomo Bonanno, 1988. "Vertical Restraints in a Model of Vertical Differentiation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(3), pages 555-570.
    22. Andrea Shepard, 1993. "Contractual Form, Retail Price, and Asset Characteristics in Gasoline Retailing," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 58-77, Spring.
    23. Yongmin Chen, 1999. "Oligopoly Price Discrimination and Resale Price Maintenance," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 441-455, Autumn.
    24. Marvel, Howard P & McCafferty, Stephen, 1985. "The Welfare Effects of Resale Price Maintenance," Journal of Law and Economics, University of Chicago Press, vol. 28(2), pages 363-379, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xiang Fang & Jun Ru & Yunzeng Wang, 2021. "The Effect of List Price on Channel Performance with Consignment," Production and Operations Management, Production and Operations Management Society, vol. 30(1), pages 235-252, January.
    2. Matsui, Kenji, 2014. "Gray-market trade with product information service in global supply chains," International Journal of Production Economics, Elsevier, vol. 147(PB), pages 351-361.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kálecz-Simon, András & Bakó, Barna, 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.
    2. Robert Innes & Stephen F. Hamilton, 2009. "Vertical restraints and horizontal control," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 120-143, March.
    3. Frank Mathewson & Ralph Winter, 1998. "The Law and Economics of Resale Price Maintenance," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 13(1), pages 57-84, April.
    4. Ralph A. Winter, 2009. "Presidential Address: Antitrust restrictions on single-firm strategies," Canadian Journal of Economics, Canadian Economics Association, vol. 42(4), pages 1207-1239, November.
    5. Lau, Amy Hing Ling & Lau, Hon-Shiang & Wang, Jian-Cai, 2010. "Usefulness of resale price maintenance under different levels of sales-effort cost and system-parameter uncertainties," European Journal of Operational Research, Elsevier, vol. 203(2), pages 513-525, June.
    6. Ayelet Israeli & Eric T. Anderson & Anne T. Coughlan, 2016. "Minimum Advertised Pricing: Patterns of Violation in Competitive Retail Markets," Marketing Science, INFORMS, vol. 35(4), pages 539-564, July.
    7. Yossef Spiegel & Yaron Yehezkel, 2000. "Price and Non-Price Restraints When Retailers are Vertically Differentiated," Econometric Society World Congress 2000 Contributed Papers 1670, Econometric Society.
    8. John Asker & Heski Bar-Isaac, 2010. "Exclusionary Minimum Resale Price Maintenance," NBER Working Papers 16564, National Bureau of Economic Research, Inc.
    9. Spiegel, Yossi & Yehezkel, Yaron, 2003. "Price and non-price restraints when retailers are vertically differentiated," International Journal of Industrial Organization, Elsevier, vol. 21(7), pages 923-947, September.
    10. Bang, Se Hoon & Jin, Yangsoo, 2015. "Brand-specificity of pre-sale services and inter-brand competition with resale price maintenance," International Review of Law and Economics, Elsevier, vol. 43(C), pages 1-9.
    11. 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.
    12. Ingene, Charles A. & Parry, Mark E. & Xu, Zibin, 2020. "Resale Price Maintenance: Customer Service Without Free Riding," Journal of Retailing, Elsevier, vol. 96(4), pages 563-577.
    13. Giorgio Zanarone, 2009. "Vertical Restraints and the Law: Evidence from Automobile Franchising," Journal of Law and Economics, University of Chicago Press, vol. 52(4), pages 691-700, November.
    14. 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.
    15. Patrick Rey & Thibaud Vergé, 2010. "Resale Price Maintenance And Interlocking Relationships," Journal of Industrial Economics, Wiley Blackwell, vol. 58(4), pages 928-961, December.
    16. Dertwinkel-Kalt, Markus & Wey, Christian, 2023. "Resale price maintenance in a successive monopoly model," DICE Discussion Papers 395, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    17. Wang, Hao, 2004. "Resale price maintenance in an oligopoly with uncertain demand," International Journal of Industrial Organization, Elsevier, vol. 22(3), pages 389-411, March.
    18. Elias Deutscher, 2022. "Brand bidding restraints revisited – What is the appropriate economic and legal framework for the antitrust analysis of vertical online search advertising restraints?," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2021-09, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    19. Haucap, Justus & Klein, Gordon J., 2012. "Einschränkungen der Preisgestaltung im Einzelhandel aus wettbewerbsökonomischer Perspektive," DICE Ordnungspolitische Perspektiven 22, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    20. Xue, Weili & Caliskan Demirag, Ozgun & Niu, Baozhuang, 2014. "Supply chain performance and consumer surplus under alternative structures of channel dominance," European Journal of Operational Research, Elsevier, vol. 239(1), pages 130-145.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:134:y:2011:i:2:p:375-387. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ijpe .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.