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On the Nonequivalence of Maximum Resale Price Maintenance and Vertical Integration

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  • James L. Hamilton
  • Nancy L. Philippart

Abstract

Maximum resale price maintenance (RPM) and vertical integration are compared without making the usual assumption that the supplier is a pure monopoly. Then, contrary to the pure monopoly analysis, maximum RPM is not in general a contractual equivalent of vertical integration. Without a pure monopoly, when maximum RPM is profitable, it would increase welfare, while profitable vertical integration generally would reduce it. The supplier generally would realize more profit, however, by using maximum RPM rather than vertical integration.

Suggested Citation

  • James L. Hamilton & Nancy L. Philippart, 1987. "On the Nonequivalence of Maximum Resale Price Maintenance and Vertical Integration," Eastern Economic Journal, Eastern Economic Association, vol. 13(4), pages 411-419, Oct-Dec.
    • Handle: RePEc:eej:eeconj:v:13:y:1987:i:4:p:411-419
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume13/V13N4P411_419.pdf
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    References listed on IDEAS

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    1. Dixit, Avinash, 1983. "Vertical integration in a monopolistically competitive industry," International Journal of Industrial Organization, Elsevier, vol. 1(1), pages 63-78, March.
    2. 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.
    3. Bittlingmayer, George, 1983. "A Model of Vertical Restriction and Equilibrium in Retailing," The Journal of Business, University of Chicago Press, vol. 56(4), pages 477-496, October.
    4. 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.
    5. Mathewson, G F & Winter, R A, 1983. "The Incentives for Resale Price Maintenance under Imperfect Information," Economic Inquiry, Western Economic Association International, vol. 21(3), pages 337-348, July.
    6. Blair, Roger D. & Kaserman, David L., 1983. "Law and Economics of Vertical Integration and Control," Elsevier Monographs, Elsevier, edition 1, number 9780121034801.
    7. Mathewson, G F & Winter, R A, 1983. "Vertical Integration by Contractual Restraints in Spatial Markets," The Journal of Business, University of Chicago Press, vol. 56(4), pages 497-517, October.
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