Regulating recommended retail prices
- Author(s)
- Maarten Janssen, Edona Reshidi
- Abstract
This paper analyses the effects of regulated recommended retail prices (RRPs). Such recommendations by manufacturers are non-binding in nature and thus retailers do not have to adhere to them. We look at regulations, similar to that by the Federal Trade Commission (FTC), requiring at least some sales to take place at RRPs. Such regulations were introduced with the aim of protecting consumers. In the absence of regulation an equilibrium exists where the manufacturer charges the same wholesale prices across retailers. We show that regulating RRPs enables manufacturers to commit to their unobserved contracts, creating an equilibrium with wholesale price discrimination. We find that such an equilibrium increases manufacturer's profits, but harms retailers and consumers.
- Organisation(s)
- Department of Economics
- External organisation(s)
- Bank of Canada
- Journal
- International Journal of Industrial Organization
- Volume
- 85
- ISSN
- 0167-7187
- DOI
- https://doi.org/10.1016/j.ijindorg.2022.102872
- Publication date
- 12-2022
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502021 Microeconomics
- Keywords
- ASJC Scopus subject areas
- Aerospace Engineering, Economics and Econometrics, Economics, Econometrics and Finance (miscellaneous), Industrial relations, Industrial and Manufacturing Engineering, Strategy and Management
- Portal url
- https://ucris.univie.ac.at/portal/en/publications/regulating-recommended-retail-prices(57dd2d42-e13d-4326-977e-08de110efefb).html