Resale Price Maintenance and Horizontal Cartel

Whereas non-price restrictions such as exclusive territories are often tolerated while Resale Price Maintenance (RPM) is rather unanimously forbidden, the economic analysis shows so far that both types of restraints have positive and negative effects on welfare, in such a way that the balance is not clearly in favour of non-price restrictions. An often expressed idea to justify the courts' decisions against RPM is that it can limit both inter- and intra-brand competition. This paper analyses this argument in a context where manufacturers and retailers have interlocking relationships. It is shown that even as part of purely bilateral vertical contracts, RPM indeed limits the exercise of both inter- an intra-brand competition and can even generate industry-wide monopoly pricing. The final impact on prices depends on the substituability between retailers and between manufacturers, and on the extent of potential competition at the retail level.resale price maintenance, collusion, successive duopoly

Optimal Audit Policy and Heterogenous Agents

Frauds can be explained not only in terms of individual willingness to cheat, but may also be driven by opportunities to behave dishonestly. The audit policy should therefore be different for different categories of agents. This paper focuses on the optimal audit policy when there are two categories of agents and shows that the auditor adopts different policies depending on its budget. When resources are quite limited, the auditor sets identical audit probabilities for both types. On the other hand, in most of the cases, the authority should first ensure that people with lower opportunities choose not to commit an offence.fraud, audit, opportunities, budget allocation

Horizontal Mergers, Structural Remedies and Consumer Welfare in a Cournot Oligopoly with Assets

Competition authorities sometimes require that firms divest some of their assets to rivalsin order to allow a merger to take place. This paper extends the results of Farrell andShapiro [1990a] and shows that, in the absence of technological synergies, a merger ishighly unlikely to benefit consumers, even if it is subjected to appropriate structuralremedies. For instance, a merger may ultimately lead to a lower price only if at leasttwo different firms acquire the divested assets, and if the merging parties had relativelyimportant pre-merger market shares.

Resale Price Maintenance and Interlocking Relationships

An often expressed idea to motivate the per se illegality of RPM is that it can limit interbrandas well as intrabrand competition. This paper analyzes this argument in a context where manufacturersand retailers enter into “interlocking relationships”, that is, when rival manufacturersdistribute their products through the same competing retailers. It is shown that, even as part ofpurely bilateral vertical contracts, RPM indeed limits the exercise of both inter- and intra-brandcompetition and can generate industry-wide monopoly pricing. The final impact on prices dependson the extent of potential competition at either level as well as on the manufacturers’ andretailers’ influence in determining the terms of the contracts. Our analysis sheds a new light onongoing legal developments and is supported by recent empirical studies.