Resale Price Maintenance and Manufacturer Competition for Exclusive Dealerships

Two manufacturers distribute their brands through exclusive retail dealers, and must compete for consumers indirectly by inducing retailers to carry their brands. We compare equilibrium outcomes with and without resale price maintenance. Maximum RPM lowers the retail price if manufacturers cannot employ franchise fees. Minimum RPM raises the retail price if manufacturers cannot set a wholesale price above marginal cost and must employ only a franchise fee. However, these traditional insights are reversed if manufacturers can set both a wholesale price and a franchise fee in the equilibrium without RPM.