Can resale price maintenance and franchise fees correct sub-optimal levels of re.英文书.pdf

C OR R EC T S U B-OPTIM A L LEV ELS OF R ETA IL S ER V IC E? * Martin K. PERRY Robert H. PORTER Northwestern b’nicersity. Eransrm. IL 60208. USA Fina l ve rs ion re ce ive d Nove mbe r 1988 This pa pe r e xa mine s re s a le price ma inte na nce by a monopoly ma nufa cture r who s e lls its product through monopolis tica lly compe titive re ta ile rs . The re ta ile rs a ls o provide s e rvice . but the re is a n e xte rna lity in its provis ion. If the ma nufa cture r s e ts only a whole s a le price . the e xte rna lity re s ults in too little s e rvice , a nd the a ddition of RPM will not corre ct this . Ma ximum RPM is us e d only to corre ct the s ucce s s ive monopoly proble m with no e ffe ct on s e rvice . Howe ve r, if the ma nufa cture r ca n a ls o s e t a fra nchis e fe e , too little s e rvice a ris e s whe n the e xte rna lity is la rge . Minimum RPM will corre ct this . incre a s ing both protits a nd cons ume r s urplus . This pa rtia lly confirms the Te ls e r (1960) a rgume nt for RPM. Whe n the e xte rna lity is s ma ll. re ta ile rs provide too much s e rvice , a nd the ‘ve rtica l e xte rna lity’ a rgume nt is inva lid. The s e re s ults s ugge s t tha t the ins ights from s imple ve rtica l mode ls ma y not ge ne ra lize to mode ls which a llow othe r dime ns ions of non-price compe tition a mong re ta ile rs . 1. Introduction Th i s paper is concerned with the efficacy of resale price maintenance (RPM) and franchise fees (FF) when employed by a manufacturer distributing its product through a monopolistically competitive retail stage. We assume that the manufacturer is a monopolist who can set the wholesale price, but who may also be able to set the retail price and/or a franchise fee. Thus, the interesting aspects of the model arise from our assumptions about the retail stage. First, each retailer is inherently differentiated from the other retailers. The retail price is then generated by a monopolistically competitive equilibrium. Moreover, t