Marie-Laure Allain, Claire Chambolle
International Journal of Industrial Organization, Volume 29, Issue 4, Pages 373-385.
Publication year: 2011


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.

JEL classification: L13L41; L42

Keywords: Price-floorResale price maintenance;Buyer power; Competition