Abstract
We provide a novel pro-competitive rationale for resale price maintenance (RPM). We consider a model where some consumers are fully informed about downstream prices while other consumers are not. When an upstream manufacturer imposes a floor on downstream prices, this qualitatively changes downstream competition— influencing not just the level, but also the dispersion, of prices. The manufacturer optimally imposes a price floor which just eliminates all downstream price dispersion, and this leads to both higher (aggregate) consumer surplus and higher total welfare as compared to the case without RPM.
Keywords
Resale price maintenance, consumer search, price dispersion;
Reference
Andrew Rhodes, and Yang Yang, “Resale Price Maintenance and Consumer Search”, TSE Working Paper, n. 25-1695, November 2025.
Published in
TSE Working Paper, n. 25-1695, November 2025