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Expectations about the price effects of resale price maintenance (RPM) must play a central role in evaluating its impact. But those expectations must account for the behavior of a supplier that chooses to compensate its dealers for their promotional efforts through protected margins higher than those that would prevail under unrestricted intrabrand competition. Interbrand competition will pressure such a supplier to reduce the wholesale price it charges dealers. This article illustrates this process by examining two cases involving the sale of heavy trucks. Virtually identical pricing policies designed to compensate only those dealers that expanded brand sales were treated differently by the courts depending on whether the policy was interpreted as price discrimination or RPM. This article shows that RPM was implemented to enhance interbrand competition and that its price effects are mismeasured when a focus solely on intrabrand competition ignores the feedback on supplier policy that such competition entails.

Fair trade, also known as resale price maintenance (RPM), is a per se violation of the antitrust laws. Economic theory suggests that RPM may enhance the efficiency of distribution, but opposition to the practice remains strong. This opposition may stem from concern that RPM raises retail prices and penalizes well‐informed customers. This paper summarizes research on the motivation for RPM as well as its impact on prices. The analysis suggests that comparing prices in RPM jurisdictions with those in free‐trade areas provides little guidance on likely effects if RPM were permitted everywhere. An analysis of RPM's impact on prices is developed, and then this analysis is employed to assess RPM's welfare effects. Results of the welfare analysis are shown to depend crucially on which form of cost function is assumed for services provided by dealers.

The public sector contracting literature has long argued that outsourced services need to be and, in fact, are subject to a more elevated level of scrutiny compared to internally delivered services. Recently, the performance measurement and management literature has suggested that the twin themes of accountability and results have altered the management landscape at all levels of government. By focusing on performance monitoring, the implication is that monitoring levels for internally provided services should more closely approximate those for contracted services. The analysis provided here yields empirical comparisons of how governments monitor the same service provided in‐house and contracted out. We find evidence that services provided internally by a government's own employees are indeed monitored intensively by the contracting government, with levels of monitoring nearly as high as those for services contracted out to for‐profit providers. In contrast, however, we find strong evidence that performance monitoring by the contracting government does not extend to nonprofit and other governmental service providers, each of which is monitored much less intensively than when comparable services are provided internally. For such service providers, it appears that monitoring is either outsourced along with services, or simply reduced.