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2001•RePEc: Research Papers in EconomicsRequires access

Resale Price Maintenance in an Oligopoly with Uncertain Demand

Hao Wang

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Abstract

This paper tries to clarify the effects of resale price maintenance (RPM) in a market where there is demand uncertainty and the manufacturers have to compete with one another. It shows that with RPM, competing manufacturers can earn more profits, promote wholesale demand for inventories from the retailers, enhance the social welfare, and preclude the possible coordination failure between the manufacturers. But the effect of RPM on the consumer surplus is ambiguous.

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What this paper is about

This paper tries to clarify the effects of resale price maintenance (RPM) in a market where there is demand uncertainty and the manufacturers have to compete with one another. It shows that with RPM, competing manufacturers can earn more profits, promote wholesale demand for inventories from the retailers, enhance the social welfare, and preclude the possible coordination failure between the manufacturers. But the effect of RPM on the consumer surplus is ambiguous.

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Available abstract

This paper tries to clarify the effects of resale price maintenance (RPM) in a market where there is demand uncertainty and the manufacturers have to compete with one another. It shows that with RPM, competing manufacturers can earn more profits, promote wholesale demand for inventories from the retailers, enhance the social welfare, and preclude the possible coordination failure between the manufacturers. But the effect of RPM on the consumer surplus is ambiguous.

Key concepts: Oligopoly, Duopoly, Price dispersion, Economic surplus, Microeconomics, Product differentiation, Competition (biology), Economics

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