Loss-leaders Banning Laws as Vertical Restraints
This paper explores the indirect in‡ationary mechanism allowed byloss leaders banning laws. In a model where a monopolist producer sells his productthrough vertically separated and di¤erentiated retailers, we show that the ban of resaleat a loss can be used strategically by the producer to increase his wholesale price andpay the retailers through negotiated listing fees, thus raising his profit. The ban turnswholesale prices into ‡oor prices, thus increasing resale price and lessening consumers’welfare. These results are robust if the listing fees are two-part tari¤.
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