Vertical Information Restraints: Pro- and Anti-Competitive Impacts of Minimum Advertised Price Restrictions
NBER Working Paper No. 22771
We consider vertical contracts where the retail market may involve search frictions. Minimum advertised price restrictions (MAP) act as a restraint on customers’ information and so can increase search frictions in the retail sector. Such restraints, thereby, soften retail competition—an impact also generated by resale price maintenance (RPM). However, by accommodating (consumer or retailer) heterogeneity, MAP can allow for higher manufacturer profits than RPM. We show that they can do so through facilitating price discrimination among consumers; encouraging service provision; and facilitating manufacturer collusion. Thus, welfare effects may be positive or negative compared to RPM or to the absence of such restrictions.
Document Object Identifier (DOI): 10.3386/w22771
Published: John Asker & Heski Bar-Isaac, 2020. "Vertical Information Restraints: Pro- and Anticompetitive Impacts of Minimum-Advertised-Price Restrictions," The Journal of Law and Economics, vol 63(1), pages 111-148.
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