Resale Price Maintenance and Consumer Search

Résumé

We provide a novel pro-competitive rationale for minimum resale price mainte-nance (RPM). In our model some consumers are fully informed about downstream prices while other consumers are not. When an upstream manufacturer imposes a floor on downstream prices, this changes not just the level of downstream prices but also their dispersion. The manufacturer optimally imposes a price floor which just eliminates all downstream price dispersion, and this leads to both higher (aggre-gate) consumer surplus and higher total welfare as compared to the case without RPM. We also show that when downstream entry is costly, minimum RPM can outperform maximum RPM.