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Resale Price Maintenance and Collusion

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  • Rey, Patrick
  • Jullien, Bruno

Abstract

The paper revisits the conventional wisdom according to which vertical restrictions on retail prices help upstream firms to collude. We analyse the scope for collusion with and without resale price maintenance (RPM) when retailers observe local shocks on demand or retail costs. In the absence of RPM, retail prices react to retailers' information and deviations from collusive behaviour are thus difficult to detect. By eliminating retail price flexibility, RPM facilitates the detection of deviations but reduces profits and increases the short-run gains from a deviation. Overall, RPM can facilitate collusion and it reduces total welfare whenever firms choose to adopt it.

Suggested Citation

  • Rey, Patrick & Jullien, Bruno, 2000. "Resale Price Maintenance and Collusion," CEPR Discussion Papers 2553, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2553
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    References listed on IDEAS

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    More about this item

    Keywords

    Collusion; Resale price maintenance; Antitrust; Vertical restraints;
    All these keywords.

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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