RPM and Vertical Integration With Upstream Competition and Noncontractible Efforts
Abstract
ABSTRACT We study RPM and vertical integration in a common agency setting with two differentiated manufacturers and one retailer, where consumer demand depends on both the manufacturers' and retailer's noncontractible efforts. Under vertical separation, the adoption of maximum RPM by both manufacturers is an equilibrium and intensifies competition, since manufacturing margins are positive to incentivize manufacturing effort. This benefits consumers and may lower industry profits relative to a scenario where RPM is not available. Vertical integration between the retailer and one of the manufacturers increases industry profits and, when retail effort is also important, may benefit consumers by mitigating double marginalization.
Fields of Study & Subjects
Supply Chain and Inventory Management
Publication details
- Journal / source
- Journal of Industrial Economics
- Volume
- 74
- Issue
- 3
- Pages
- 349–366
- Publication date
- 4 May 2026
- Language
- EN