Resale price maintenance is only profitable if consumers' valuation of the product- specific service exceeds the retailer's marginal cost of providing it.

Question

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Resale price maintenance involves the manufacturer setting a minimum price at which the retailer can sell the product. It is profitable for the manufacturer if the value consumers place on the service provided by the retailer exceeds the marginal cost of providing it. If the cost is higher than the value, then the retailer may not be able to make a profit and may not be willing to sell the product at the minimum price required by the manufacturer.

Resale Price Maintenance Is Only Profitable If Consumers' Valuation of the Product-