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Multi-Product Pricing and Minimum Resale Price Maintenance

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  • Dertwinkel-Kalt, Markus
  • Wey, Christian

Abstract

We provide a novel explanation for why manufacturers want to enforce a minimum resale price (min RPM) on retailers. A manufacturer sells her good via a multi-product retailer to final consumers by charging a linear wholesale price. The manufacturer then maximizes her profit through min RPM whenever the Edgeworth taxation paradox (ETP) occurs, that is, whenever the retailer could increase profits by decreasing all prices. Unlike many other justifications for RPM, our ETP-driven explanation for min RPM critically relies on interbrand competition, and it is-at least in the case of linear demand functions-always to the detriment of consumers.

Suggested Citation

  • Dertwinkel-Kalt, Markus & Wey, Christian, 2021. "Multi-Product Pricing and Minimum Resale Price Maintenance," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242338, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc21:242338
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    More about this item

    Keywords

    Resale Price Maintenance; Vertical Restraints; Retailing;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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