Resale price maintenance is efficient if
A) it is used in conjunction with a tying arrangement.
B) the manufacturer does not engage in predatory pricing.
C) retailers charge the lowest price for the product.
D) it enables a manufacturer to induce an efficient standard of service from retailers.
E) it takes the place of an exclusive deal.

Question

Quizplus · Accepted Answer

Resale price maintenance can be efficient if it enables a manufacturer to induce an efficient standard of service from retailers. This means that by setting a minimum price for the product, the manufacturer can ensure that retailers are providing value-added services such as product presentations, demonstrations, and after-sales service. This can increase customer satisfaction and create a competitive advantage for the manufacturer. However, if the manufacturer engages in predatory pricing, or if retailers charge the highest price for the product, the resale price maintenance would not be efficient. Additionally, the use of tying arrangements or exclusive deals could also reduce competition and harm consumer welfare.

Resale Price Maintenance Is Efficient If