The Impact of RPM on Welfare Level under Competition between Supply Chains

In Resale Price Maintenance (RPM) contracts, the manufacturer specifies the resale price that retailers must charge to consumers. The aim of the research is to investigate the role of using a RPM contract in a market where there are two competitive chains with demand uncertainty. We find that under the insignificant difference between high and low primary market demand and high degree of substitution between the two competitive products, after vertical integration of firms in every single chain adopting RPM strategy can enhance the social welfare level from disintegrated chain using the clearance pricing strategy.