Resale Price Maintenance and Restrictions on Dominant Firm and Industry-Wide Adoption

ESRC Centre for Competition Policy Working Paper Series

27 Pages Posted: 26 Aug 2010

See all articles by Øystein Foros

Øystein Foros

Norwegian School of Economics (NHH) - Department of Business and Management Science

Hans Jarle Kind

Norwegian School of Economics & Business Administration (NHH); CESifo (Center for Economic Studies and Ifo Institute); Norwegian School of Economics (NHH) - Department of Economics

Greg Shaffer

University of Rochester - Simon Business School

Multiple version iconThere are 2 versions of this paper

Date Written: August 25, 2010

Abstract

We consider a model in which firms use resale price maintenance (RPM) to dampen competition. We find that even though the motive for using RPM is thus anticompetitive, market forces may limit the overall adverse impact on consumers. Indeed, we find that when there are a large number of firms in the market, consumer welfare under a laissez-faire policy might be as high or almost as high as it would be under an alternative policy in which RPM is banned. Government interventions that put an upper limit on the extent of industry-wide adoption of RPM can have adverse welfare effects in the model. We further show that proposed guidelines in the United States and Europe may come close to minimizing welfare.

Keywords: Vertical restraints, safe harbors, antitrust policy

JEL Classification: L13, L41, L42

Suggested Citation

Foros, Øystein and Kind, Hans Jarle and Shaffer, Greg, Resale Price Maintenance and Restrictions on Dominant Firm and Industry-Wide Adoption (August 25, 2010). ESRC Centre for Competition Policy Working Paper Series, Available at SSRN: https://ssrn.com/abstract=1664937 or http://dx.doi.org/10.2139/ssrn.1664937

Øystein Foros

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

Hans Jarle Kind (Contact Author)

Norwegian School of Economics & Business Administration (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway
+47 55 583 890 (Phone)
+47 55 583 901 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Norwegian School of Economics (NHH) - Department of Economics

Helleveien 30
N-5035 Bergen
Norway

Greg Shaffer

University of Rochester - Simon Business School ( email )

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