Anti-Competitive Effects of Resale-Below-Cost Laws
We show that resale-below-cost laws enable producers to impose price-floors toretailers. This mechanism suppresses downstream competition but also and moresurprisingly dampens upstream competition, leading to higher prices and lower welfare.This article also shows that a price-floor implements corner equilibria that areworse for welfare than a resale price maintenance contract. Retailers’ buyer powerappears as a key element for a price-floor to work out.
Year of publication: |
2007
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Authors: | Allain, Marie-Laure ; Chambolle, Claire |
Institutions: | Centre de Recherche en Économie et Statistique (CREST), Groupe des Écoles Nationales d'Économie et Statistique (GENES) |
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