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RESALE PRICE MAINTENANCE VERSUS DELEGATION, UNDER ASYMMETRIC INFORMATION *
Author(s) -
NARIU TATSUHIKO,
LEE DONGJOON
Publication year - 2013
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2011.02288.x
Subject(s) - product differentiation , delegate , delegation , microeconomics , economics , product (mathematics) , homogeneous , private information retrieval , resale price maintenance , industrial organization , business , cournot competition , incentive , computer science , physics , geometry , mathematics , management , thermodynamics , programming language , computer security
In this paper we analyze vertical restraints by two manufacturers in which each sells through a separate retailer who has private information on the uncertain demand it faces. The degree of product differentiation plays an important role in equilibrium. If the products are differentiated, the dominant strategy is for each manufacturer to itself stipulate the retail price of its products. If the products are homogeneous, there exist two equilibria: either both manufacturers impose retail price maintenance (RPM), or both delegate pricing to the retailer. Social welfare is greater under regulatory regimes that permit RPM, irrespective of product differentiation or demand uncertainty.