Abstract
We consider vertical contracts where the retail market may involve search
frictions. Minimum advertised price restrictions (MAP) act as a restraint on
customers’ information and so can increase search frictions in the retail sector.
Such restraints, thereby, soften retail competition—an impact also generated
by resale price maintenance (RPM). However, by accommodating (consumer
or retailer) heterogeneity, MAP can allow for higher manufacturer profits than
RPM. We show that they can do so through facilitating price discrimination
among consumers; encouraging service provision; and facilitating manufacturer
collusion. Thus, welfare effects may be positive or negative compared to RPM
or to the absence of such restrictions.