Challenges for Empirical Research on RPM
Review of Industrial Organization, January 2017
Resale price maintenance (RPM) is a contractual arrangement between manufacturers and distributors that establishes a price range (typically, a minimum price) for which a product may be sold at retail. Depending on the product and market in question, there are sound economic arguments for both pro- and anti-competitive consequences to RPM agreements. However, given that the contracts themselves are rarely accessible to researchers, it can be difficult to determine whether an RPM agreement even exists in a given market, much less to definitively isolate and study the RPM's knock-on effects in terms of competition and consumer welfare. Thus, lawmakers have long struggled with a scarcity of empirical evidence when it comes to guiding effective public policy.
In “Challenges for Empirical Research on RPM,” published online by Springer Science + Business Media, Analysis Group Vice President David Smith and coauthor Alexander MacKay of Harvard University's Kennedy School of Government discuss this lack of market transparency and explore various ways in which researchers may attempt to clear the waters. Given the historical challenges, the authors explain, careful methodology will be the key to unlocking a more comprehensive understanding of RPM's effects going forward.