We consider competing two‐sided platforms selling directly to one side of the market, and through an agent to the other side. Platforms offer nonlinear tariffs, and can choose whether to contract with the same or different agents. We study the platforms’ incentives to impose resale price maintenance (RPM), and the effect on end customers. We find that, even if customers on both sides value each other's participation, platforms impose minimum RPM to raise prices on both sides simultaneously if platform competition is sufficiently strong. In a linear demand example, we find that overall welfare decreases with minimum prices and increases with maximum prices.
How should manufacturers motivate their retailers to provide customer services? The vertical restraints literature tells us that retail competition distorts service incentives in the short run. We consider how repeated interaction mitigates this problem, and particularly how a manufacturer can provide service incentives with discretionary lump‐sum payments. We find that these payments may allow the manufacturer to sustain optimal service levels even if retailers are very impatient. We also show that banning reverse lump‐sum payments may deprive consumers of the chance to enjoy high‐quality services, and thereby reduce their welfare.
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