Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 5 Firm Behavior and the Organization of Industry
Chapter 17 of 36 - Oligopoly
Section 18 of 22
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Most economists and policymakers agree price-fixing among competing firms should be illegal.
Antitrust laws have been used to ban or limit some other business practices with lesser effects, including
-1- resale price maintenance
-2- predatory pricing
-3 - tying
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-1- Resale Price Maintenance
Consider fictional company “Super Electronics” sells DVD players to retail stores for wholesale price of $300.
Super requires competitive retailers to charge customers $350.
This type of requirement is called resale price maintenance.
Any retailer that charges less than $350 would violate its contract with Super.
Resale price maintenance can be considered anticompetitive and detrimental to society.
As with an agreement among members of a cartel, it prevents retailers’ price competition.
Therefore, courts have often judged resale price maintenance a violation of antitrust laws.
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Some economists defend resale price maintenance on two grounds.
1- They deny it is aimed at reducing competition.
To the extent Super has any market power, it could exert that power through changing its wholesale price rather than through resale price maintenance.
Super has no incentive to discourage competition among its retailers because a cartel of retailers sells less than a group of competitive retailers.
A cartel is like a monopoly, members would sell at a price well over $350, reducing sales volume for Super.
Super would be worse off if its retailers were a small cartel of retailers.
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2- They believe resale price maintenance has a legitimate purpose.
Super may want its retailers to help it maintain its high-quality image by providing customers a quality showroom and an expert sales force.
Without resale price maintenance some customers would take advantage of a $350 product price store's service to learn about the DVD player's special features then buy the item at a $325 price discount retailer that doesn’t provide this service.
One can consider good in-store service as a public good among the retailers selling Super products.
When one party provides a public good, others can enjoy it without paying.
In this case, discount retailers would free-ride on the service provided by other retailers leading to less service than is desired by Super.
Resale price maintenance is a way for Super to solve this free-rider problem.
Here we can see a business practice appearing to reduce competition may have a legitimate purpose.
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legitimate and illegitimate
gōhō to higōhō
合法と非合法
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