The Korean Economic Review
Multi-Product Retail Competition and Minimum Resale Price Maintenance
Hyun Jae Doh (Korea Energy Economics Institute)Year 2010Vol. 26No. 2
This paper examines the incentives of adopting the minimum resale pricemaintenance within the context of a model that incorporates inter- and intrabrandcompetition. When the manufacturing and retail sectors arecompetitive, a manufacturer would not voluntarily want to impose aminimum resale price maintenance since it would reduce the sales of theproduct and hence its profit, whereas a retailer with a higher price than itscompetitor would desire to have the minimum resale price maintenanceimposed. This paper shows that a retailer with a larger market share cancoerce manufacturers of less popular products into adopting minimum resaleprice maintenance, using it as a strategic tool for raising a rival retailer'sprice. The possibility of implementing such coercion depends on the extent ofavailability of retail shelf space and the disparity in the retailers’ marketshares.