This article discusses the empirical challenges that researchers face when demonstrating the existence and effects of resale price maintenance (RPM). We outline three approaches for finding price effects of RPM and the corresponding hurdles in data and methodology. We show that the quantity test that was suggested by Posner (Univ Chic Law Rev 45(1):1–20, 1977; Univ Chic Law Rev 48:6–26, 1981) does not identify the change to welfare when demand-enhancing effects are considered generally. Finally, we present some solutions to the challenge of identifying welfare effects, and we suggest guidelines for future research.
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That is not to claim that retailers have nothing to lose. Our interviews with retailers indicate that those that threaten or pursue litigation risk losing their relationship with manufacturers.
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Any transformation of the demand curve that is composed of a shift and a rotation can be decomposed into these two transformations.
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Other demand considerations, such as dynamics, make the analysis more complex. For example, Aviv et al. (2016) show that “a higher price and lower output of a limited lifetime product can be welfare-improving if they result from a policy that leads to an intertemporal redistribution of demand,” such as when retailers implement a most-favored-customer clause.
See, e.g., MacKay and Smith (2014).
For a discussion of minimum RPM as a self-enforcing contract, see Klein and Murphy (1997).
The Sony BRAVIA model KDL-32BX300 was released March 2010; the KDL-32BX320 was released in 2011; and the KDL-32BX330 was released in 2012, around the time Sony began enforcing minimum RPM. See Ann Zimmerman, “Sony, Samsung Rein In Retailers’ Discounts on TVs,” The Wall Street Journal, May 23, 2012. Retrieved August 12, 2016, from http://www.wsj.com/articles/SB10001424052702304791704577420383631021786.
This may come as no surprise to those who recall that, not long ago, Best Buy—a store that primarily sells durable goods with high search costs—was said to have the worst CEO in the world. See Louis Lavelle, “The Worst CEOs of 2012,” Bloomberg, December 13, 2012. Retrieved August 12, 2016, from http://www.bloomberg.com/news/articles/2012-12-13/the-worst-ceos-of-2012.
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MacKay, A., Smith, D.A. Challenges for Empirical Research on RPM. Rev Ind Organ 50, 209–220 (2017). https://doi.org/10.1007/s11151-016-9562-8
- Antitrust issues and policies
- Antitrust law
- Firm behavior: empirical analysis
- Resale price maintenance
- Welfare economics