Duopoly,Resale Price Maintenance And Retail Service

In recent years,there have been numerous cases of resale price maintenance(RPM)at home and abroad,and the results of the judgment have been controversial.In the academic world,there are also many differences in the discussion on the effects of RPM.There are "promotional welfare groups" represented by "service argument",there are also many scholars who think that RPM is anti-competitive.Therefore,a more detailed discussion of the rationality of RPM is of great significance to both theory and reality.In the classic "service argument" group,scholars mainly discussed from the aspects of easing the free-riding problem,improving the reputation of retailers,and differentiated services under the heterogeneity of consumers.However,most of the literature on service argument focuses on the single-manufacturer market structure and does not model the real market situation well,because in reality it is more common in multi-manufacturer games.In addition,retailer's service cost has a negligible effect on the amount of service provided by retailers,but few scholars have studied from the perspective of retailer service costs.Based on the above considerations,this paper constructs a duopoly model and analyzes the retailer's service cost as the main variable.This paper finds that RPM can be divided into two different purposes at the threshold of service cost: RPM is mainly for retail service at low service cost;RPM is mainly for mitigating the negative externality of retailer free-rider actions at high service cost.Implementing RPM also has two different consequences: when service costs are low,RPM increases retail prices without changing retail services,and when service costs are high,RPM increases both retail services and retail prices.In the model of this paper,both upstream and downstream are symmetric game subjects,and retail services have a service capacity cap cause the retailer cannot increase the service level indefinitely.Under such setting,if the retail service cost is high enough,when some consumers accept the service at one retailer and then purchase the product from another,the retail service level will be inferior to the equilibrium level,which is called “the free-rider” problem.If manufacturers can now control retail prices through RPM and then adjust the gap between retail and wholesale prices to subsidize retailers' high service costs and spur retail service levels.If the retail service cost is low enough,the batch-zero relationship presents another situation.Due to the low cost of service,even if there is free-riding problem,retailers will not care too much.They will still provide services at the equilibrium level so the two manufacturers will divide the total service.At this point,when a manufacturer uses RPM to increase the retail price,the retail profit of the product will be higher than the other,which will induce the retailer to allocate more services to that product.Of course,both manufacturers will use RPM to compete for a limited amount of retail services.This kind of competition is inefficient because the result is only an increase in price and retail profit,and the total amount of service will not change.The purpose and the result of these two RPM actions is based on the retail service cost,whose threshold is solved in this paper.This paper expands the service argument under the monopoly model to the duopoly model,and highlights the key role of retail service cost in the use of RPM for the first time,adding new content to the traditional service argument.The research in this paper can also explain the phenomenon of RPM in the book industry,luxury goods industry and e-commerce platform.The research in this paper also has policy implications.When an antitrust agency determines the rationality of a manufacturer's RPM,it is not only about the parameters and variables associated with the manufacturer,but also other important variables such as retail service costs.When the retailer's service cost is high,the manufacturer's implementation of RPM may be to encourage retailers to enhance retail services and provide consumers with a better shopping experience.In this case,the relative agency should consider exempting RPM behavior;When the cost of service is low,the manufacturer's implementation of RPM is likely to be inefficient competition with competitors for retail services,and will not increase the total supply of retail services.This kind of RPM behavior should be banned.