Oligopoly Price Discrimination and Resale Price Maintenance
Year: 1999
Type: article
Abstract: Oligopoly price discrimination in the retail market prevents a manufacturer from inducing optimal retail margins through any wholesale price. This motivates the manufacturer to impose resale price maintenance. In a model of third-degree price discrimination by rival retailers, a retail price ceiling (or floor) enables the manufacturer to restore the first best. Imposing a fixed retail price is generally not optimal because the manufacturer wants to eliminate price discrimination based on consumers' abilities to switch retailers, not based on consumers' valuations. Under resale price maintenance, welfare may either increase or decrease, and it may increase even when total output is reduced.
Source: The RAND Journal of Economics
DOI: 10.2307/2556057
Author: Yongmin Chen
Institution: University of Colorado Boulder
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1997173580