Competitive Effects of Resale Price Maintenance Through Inventory: Evidence from the Publishing Industry

This paper examines the competitive effects of resale price maintenance (RPM) through inventory decisions under demand uncertainty. We focus on the Japanese publishing industry where printed books are excepted from RPM prohibition. We develop and estimate a model of RPM in which price and inventory are determined before demand is realized. Counterfactual simulations show that the price ceiling due to RPM plays a welfare-enhancing role, whereas the price floor can improve supply-side welfare at the expense of consumer surplus. The parameter region for which price floor can improve consumer surplus exists but is narrow.