Anti-competitive effects of resale-below-cost laws |
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Authors: | Marie-Laure Allain Claire Chambolle |
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Institution: | a Department of Economics, Ecole Polytechnique 91128 Palaiseau, Franceb CREST, Francec INRA UR1303 ALISS, 94205 Ivry-sur-Seine, Franced Ecole Polytechnique, France |
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Abstract: | We show that resale-below-cost laws enable producers to impose industrywide price-floors to retailers. This mechanism suppresses downstream competition but also dampens upstream competition, leading to higher prices. Price-floor may be more profitable for producers than resale price maintenance contracts and, while resale price maintenance may have ambiguous effect on welfare, price-floors always harm welfare. Retailers' buyer power appears as a key element for a price-floor to work out. |
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Keywords: | L13 L41 L42 |
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