The Effects of Resale Price Maintenance on Firms' Profits and Social Welfare under Double Moral Hazard

• Main Authors: Her, Cherng-Shiann, 何承憲
• Other Authors: Yi-Heng Cheng
• Format: Others
• Language: zh-TW
• Published: 1998
• Online Access: http://ndltd.ncl.edu.tw/handle/92223666206377892444

碩士 === 淡江大學 === 產業經濟學系 === 86 === Resale price maintenance (RPM) which is usually imposed by manufacturer is not allowed under Fair Trade Law, article 18,in Taiwan. The main reason is that authority wants to keep the market competition and try to avoid the unfair trade incurred by consumers. However, RPM contract may also have efficient influence to the social welfare.When downstream retailer could affect demand by non-price factors, such as sale service. These factors have a lot of influence to demand, but it is costly for upstream manufacturers to monitor these factors. Therefore, these factors becomes uncontractible. The manufacturers also control some non-price factors, such as product quality, and these factors affect demand, too. The high monitoring cost makes the behaviors of manufacturer are not contractible, either. The problem of double moral hazard thus exists in the vertical relationship. The purpose of this paper is to discuss the effects of vertical restraints in the case of successive monopoly as well as in that of one manufacturer with two retailers when double moral hazard problem emerges between manufacturer and retailer.This paper found that RPM contract can reduce double moral hazard problem and increase consumer surplus and social welfare in both monopoly and duopoly retail market. Though, it can not achieve the best equilibrium of manufacturer under vertical integration. Comparing with RPM, franchise fee contract will be preferred in monopolistic retailer case, because it can achieve the manufacturer's first- best outcome. But in the duopolistic retailer case, optimal contract should include both franchise fee and RPM asin Romano' s.