The Effects of Resale Price Maintenance on Shareholder Wealth: The Consequences of Schwegmann

Event study methodology is used to assess the effects of the 1951 US Supreme Court Schwegmann decision, which severely weakened the enforcement of resale price maintenance contracts in the United States. Overall, upstream industries with heavy RPM usage apparently were not adversely affected by the...

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Bibliographic Details
Published in:The Journal of industrial economics 1994-06, Vol.42 (2), p.205-216
Main Author: Hersch, Philip L.
Format: Article
Language:English
Subjects:
Cartels
Chain stores
Coefficients
Consumer electronics
Economic theory
Effects
Electronic products industry
Hypotheses
Industrial market
Market share
Prices
Resale
Resale price maintenance
Retail outlets
Retail stores
Shareholders wealth
Shares
Statistical analysis
Supreme Court decisions
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Summary:Event study methodology is used to assess the effects of the 1951 US Supreme Court Schwegmann decision, which severely weakened the enforcement of resale price maintenance contracts in the United States. Overall, upstream industries with heavy RPM usage apparently were not adversely affected by the decision. Among large retailing groups, a positive effect of the decision was found for department stores. Cross-section tests of the motives for the adoption of RPM provide support for hypotheses based on free-ridership, dealer cartels, and to a lesser extent protection of product reputation.
ISSN:0022-1821
1467-6451
DOI:10.2307/2950491