【ISER SEMINAR277】

Maximum Resale Price Maintenance and Services

Topic: Maximum Resale Price Maintenance and Services

Speaker：Travis Ng，the Chinese University of Hong Kong

Time: Sep 9, 2021： 15:00 – 16：30 

Mode：On-line

Introduction to the speaker

Travis Ng is an Associate Professor of the Department of Economics of the Chinese University of Hong Kong. He teaches industrial organization and law and economics. His research interest is competition. He does both theoretical and empirical research. His research papers have been published in such journals as Review of Economics and Statistics, Journal of Economics & Management Strategy, Journal of Economic Behavior and Organization and Journal of Comparative Economics.

Abstract

We propose a theory of maximum resale price maintenance (RPM) that increases downstream services. A manufacturer supplies a product that would bring the retailers cross-selling opportunities of another product that the manufacturer does not supply. To cross-sell the customers, the retailers must provide costly services. If free-riding of cross-selling services happens among the retailers, they would provide insufficient cross-selling services and price the manufacturer's product too high. The manufacturer would find it profitable to impose maximum RPM on its own product. The resulting lower price draws more customers to the retailers. More customers means more cross-selling opportunities, incentivizing the retailers to increase services. We illustrate our theory using State Oil v. Khan and explain why it is a plausible theory behind the supplier's RPM on gasoline.