Resale Price Maintenance under Demand Uncertainty and Retail Competition

This paper extends the classic analysis of Deneckere et al. (1996, 1997) by examining how retailer competition shapes the effects of resale price maintenance (RPM) under demand uncertainty. In their framework, minimum RPM can benefit consumers by encouraging retailers to hold sufficient inventory, thereby lowering prices in high-demand states. We relax the assumption of perfect competition and analyze a continuum of downstream market structures, from monopoly to perfect competition. We show how the interaction of demand uncertainty and retail competition generates distinct regimes, and we identify the conditions under which RPM improves or harms consumer welfare. The results provide guidance for both antitrust policy and managerial strategy, highlighting that the pro-competitive effects of RPM are confined to industries with moderate demand uncertainty and intermediate levels of retail competition.