This paper examines the incentives of adopting the minimum resale price
maintenance within the context of a model that incorporates inter- and intrabrand
competition. When the manufacturing and retail sectors are
competitive, a manufacturer would not voluntarily want to impose a
minimum resale price maintenance since it would reduce the sales of the
product and hence its profit, whereas a retailer with a higher price than its
competitor would desire to have the minimum resale price maintenance
imposed. This paper shows that a retailer with a larger market share can
coerce manufacturers of less popular products into adopting minimum resale
price maintenance, using it as a strategic tool for raising a rival retailer's
price. The possibility of implementing such coercion depends on the extent of
availability of retail shelf space and the disparity in the retailers’ market
shares.