Rendering Alternative Offerings Less Profitable with Resale Price Maintenance

Abstract

When it was legal, RPM was commonly observed on items such as aspirin, pens, pencils, toothpaste, soap, shaving cream, and milk. In providing a theory that is based on compensaating retailers for their opportunity cost of shelf space, and that does not hinge on the existence of externalities in non-price competition, this article explains why a manufacturer might impose RPM on these and many other products. By contrast, the use of RPM on food, grocery, and drug store items is not easily explained by standard theories such as free-riding on pre-sale services and quality certification by high-priced retailers.