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Discussion Paper Details

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Title: Resale Price Maintenance and Collusion

Author(s): Bruno Jullien and Patrick Rey

Publication Date: September 2000

Keyword(s): Antitrust, Collusion, Resale Price Maintenance and Vertical Restraints

Programme Area(s): Industrial Organization

Abstract: The paper revisits the conventional wisdom according to which vertical restrictions on retail prices help upstream firms to collude. We analyse the scope for collusion with and without resale price maintenance (RPM) when retailers observe local shocks on demand or retail costs. In the absence of RPM, retail prices react to retailers' information and deviations from collusive behaviour are thus difficult to detect. By eliminating retail price flexibility, RPM facilitates the detection of deviations but reduces profits and increases the short-run gains from a deviation. Overall, RPM can facilitate collusion and it reduces total welfare whenever firms choose to adopt it.

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Bibliographic Reference

Jullien, B and Rey, P. 2000. 'Resale Price Maintenance and Collusion'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2553