Price maintenance may benefit consumers.

Contrary to popular belief, new research at Ohio State University, Columbus, suggests consumers sometimes may benefit if manufacturers are allowed to set minimum retail prices for their products. Consumer groups and Federal regulators have argued that setting minimum prices--a practice known as resale price maintenance (RPM)--is anti-competitive and means consumers will pay more for goods. That's not always the case, though, maintains James Peck, co-author of the study and professor of economics.

Under RPM, consumers actually may pay less for some goods that are in high demand, such as popular holiday toys. That's because retailers are willing to order larger inventories of a product if they are assured of a minimum resale price.

Peck, Howard Marvel, professor of economics and law at OSU, and Raymond Deneckere, professor of economics, University of Wisconsin, Madison, found that RPM can benefit consumers in situations where retailers have to order a product months in advance of selling it, before they know how popular the product will be. They have to balance the possibility that the product will not be...