Resale Price Maintenance with Secret Contracts and Retail Service Externalities
- (pp. 63-87)
Abstract
We analyze a setting where a monopolist sells through retailers that set prices and provide valuable but non-contractible services to customers. We assume that contracts are private. We find that purely bilateral price restraints have no effect on the equilibrium outcome and that the standard Bertrand prices and service levels prevail. We also show that if manufacturers can commit to industry-wide resale prices, they can obtain higher prices and service levels but will generally not be able to achieve the fully integrated outcome. Using a specific linear demand system, we find that industry-wide price floors are harmful to consumers.Citation
Gabrielsen, Tommy Staahl, and Bjørn Olav Johansen. 2017. "Resale Price Maintenance with Secret Contracts and Retail Service Externalities." American Economic Journal: Microeconomics, 9 (1): 63-87. DOI: 10.1257/mic.20140280Additional Materials
JEL Classification
- D42 Market Structure, Pricing, and Design: Monopoly
- D62 Externalities
- D86 Economics of Contract: Theory
- L12 Monopoly; Monopolization Strategies
- L42 Vertical Restraints; Resale Price Maintenance; Quantity Discounts
- L60 Industry Studies: Manufacturing: General
- L81 Retail and Wholesale Trade; e-Commerce
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