Resale price maintenance and horizontal cartel


Rey, Patrick and Vergé, Thibaud (2002) Resale price maintenance and horizontal cartel. CMPO Working Paper, (02/047)

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Description/Abstract

Wheras non-price restrictions such as exclusive territories are often tolerated while Resale Price Maintenance (RPM) is rather unanimously forbidden, the economic analysis shows so far that both types of restraints have positive and negative effects on welfare, in such a way that the balance is not clearly in favour of non-price restrictions.
An often expressed idea to justify the courts' decisions against RPM is that it can limit both inter- and intra-brand competition. This paper analyses this argument in a context where manufacturers and retailers have interlocking relationships. It is shown that even as part of purely bilateral vertical contracts, RPM indeed limits the exercise of both inter- an intra-brand competition and can even generate industry-wide monopoly pricing. The final impact on prices depends on the substituability between retailers and between manufacturers, and on the extent of potential competition at the retail level.

Item Type: Article
Related URLs:
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: University Structure - Pre August 2011 > School of Social Sciences > Economics
ePrint ID: 33363
Date Deposited: 16 May 2006
Last Modified: 27 Mar 2014 18:20
Contact Email Address: T.Verge@soton.ac.uk
URI: http://eprints.soton.ac.uk/id/eprint/33363

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