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Retailer Heterogeneity, Intra-Brand Competition and Social Welfare

Retailer Heterogeneity, Intra-Brand Competition and Social Welfare This paper considers a model where a manufacturer sells its product to consumers through competitive retailers who are heterogeneous in marginal distribution costs and geographic locations. We study the welfare implications of resale price maintenance (RPM), which eliminates the intra-brand competition. We show that with RPM, the manufacturer can make more profit at the cost of the consumers. RPM helps the high-cost retailers to stay competitive in the market, and therefore increases the total distribution cost of the society. We suggest that antitrust authorities should be concerned when intra-brand competition is lessened. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png "Journal of Industry, Competition and Trade" Springer Journals

Retailer Heterogeneity, Intra-Brand Competition and Social Welfare

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References (16)

Publisher
Springer Journals
Copyright
Copyright © 2005 by Springer Science + Business Media, Inc.
Subject
Economics; Industrial Organization; Economic Policy; R & D/Technology Policy; European Integration; Microeconomics; International Economics
ISSN
1566-1679
eISSN
1573-7012
DOI
10.1007/s10842-005-3720-2
Publisher site
See Article on Publisher Site

Abstract

This paper considers a model where a manufacturer sells its product to consumers through competitive retailers who are heterogeneous in marginal distribution costs and geographic locations. We study the welfare implications of resale price maintenance (RPM), which eliminates the intra-brand competition. We show that with RPM, the manufacturer can make more profit at the cost of the consumers. RPM helps the high-cost retailers to stay competitive in the market, and therefore increases the total distribution cost of the society. We suggest that antitrust authorities should be concerned when intra-brand competition is lessened.

Journal

"Journal of Industry, Competition and Trade" – Springer Journals

Published: Sep 24, 2005

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