Work

Resale Price Maintenance under Demand Uncertainty and Retail Competition

Year: 2025

Type: preprint

Abstract: This paper extends the classic analysis of Deneckere et al. (1996, 1997) by examining how retailer competition shapes the effects of resale price maintenance (RPM) under demand uncertainty. In their framework, minimum RPM can benefit consumers by encouraging retailers to hold sufficient inventory, thereby lowering prices in high-demand states. We relax the assumption of perfect competition and analyze a continuum of downstream market structures, from monopoly to perfect competition. We show how the interaction of demand uncertainty and retail competition generates distinct regimes, and we identify the conditions under which RPM improves or harms consumer welfare. The results provide guidance for both antitrust policy and managerial strategy, highlighting that the pro-competitive effects of RPM are confined to industries with moderate demand uncertainty and intermediate levels of retail competition.

Source: SSRN Electronic Journal

DOI: 10.2139/ssrn.5522021

Authors: Kohei Kawaguchi, Y. Jeff Qiu, Yi Zhang

Institutions: Hong Kong University of Science and Technology, Peking University

Language: English

Topic: Merger and Competition Analysis

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funder: Exploratory Research for Advanced Technology

Award: G925228835

OpenAlex ID: W4414520882

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