Manufacturers use resale price maintenance (RPM) for a variety of reasons. In a conventional market setting, when factory price is fixed, profit is maximized by ensuring the lowest possible retail price. The higher retail price ensured by RPM mean a lower quantity sold, since demand is downward sloping. The explanations of RPM remain controversial after many scholars¡¦ investigations. Pro-competitive arguments view RPM as a marketing practice that ensures an efficient distribution system. Anticompetitive arguments contend that manufacturers use RPM to maintain cartel prices and reduce competition among retailers. Understanding the incentives to adopt RPM is critical both for marketing scholars and for antitrust policymakers because RPM, which is employed over the wide variety of products, is the most important vertical restraints, in terms of both the frequency of use and the number of legal cases generated. In Taiwan, the applicability of RPM is limited by Fair Trade Law. Fair Trade Commission considers that RPM is per se illegal as a vertical restraint against competition
The explanation for RPM often cited is the special services argument, which indicates the discounter will draw customers from the retailers that provide full services when RPM is not employed. However, in practices, RPM is used in a much wider variety of products than the special services argument would predict. In this research, we examine the RPM property from the risk perspectives and determine how the incentives for using RPM are affected by the changes of economic variables. We find that the imposition of RPM is appropriate in the circumstances where retail price variance is high, sales quantities variance is low and the correlation between two variables is positive. In addition, we find that RPM can be a substitute or complement for advertising, as is found in the existing literature. Our model clearly exhibits the relationship between advertising and RPM, which are both important marketing strategies. We also find that RPM can reduce consumers¡¦ incentive to delay purchases. As the demand price elasticity increases, RPM is more strictly employed by manufactures who want to eliminate purchase delay caused by frequent markdowns. We also perform empirical tests to show that the motivation behind RPM is to reduce the negative externality of frequent markdowns on consumers¡¦ purchase delay.
| Identifer | oai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0926107-103551 |
| Date | 26 September 2007 |
| Creators | Chen, Guan-ru |
| Contributors | none, none, Miao-ling Chen, none, none |
| Publisher | NSYSU |
| Source Sets | NSYSU Electronic Thesis and Dissertation Archive |
| Language | English |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0926107-103551 |
| Rights | not_available, Copyright information available at source archive |
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