The Welfare Analysis Of Resale Price Maintenance In China's Auto Sales Market

In the process of car sale, the manufacturers lead the price. This phenomenon makes the downstream vendors and consumers in distress, mainly in the possession of manufacturers to maximize the consumer surplus, manufacturers research and develop new models based on the market demand, and they raise barriers to entry when they chose vendors, in order to enhance their monopoly power.4S stores must stand to a series of standards which are instituted by the manufacturers, and for the purpose of selling cars and get the profit after-sales service 4S stores must abide the standards and underwrite the agreements with manufacturers. So the manufacturers could implement RPM system to achieve their maximum profit.2005 the "Administration of automobile brand" reiterated the brand sales management system, adding the imbalance of status between the two sides, and impulse manufacturers replace RPM system to vendors on a certain extent.The implementation of RPM system make 4S stores shift the source of profits to the after-sales service, consumers'benefits are also affected during the process of car buying. The bargaining power of consumers are controlled by the manufacturer when they buy cars in 4S stores, and in the after-sales services are also facing high services costs of 4S stores,4S stores can exercise high strategy in the maintenance, depends on their advantages in the after-sales maintenance, including original parts and the monopoly of technology, leading the high cost of holding a car.Consumers don't have much information about the accessories of the car, they think the accessories from the 4S stores have quality assurance, and they worry about that the accessories in general maintenance shop are counterfeits or even their car's components are replaced. In fact, auto parts suppliers will put some accessories to wholesale to the specialized shops, we can say that general repair shops are not weaker than 4S.4Sstores.4Sstores improve the service quality, but they increase the burden on consumers. Many consumers will be shifted to specialized shops beyond the maintenance period; in the long run the 4S stores will lose the consumers, coupled with low profit on vehicle, these cause 4Sstores difficulties in management.Low-end consumers are facing a large loss of welfare in the industrial chain, the implementation of RPM system which put into practice by the manufacturers make the consumers have to bear the fees in two stages:the weak bargaining power when buying a car; the poor status of no alternative and high costs when they need after-sales service. Of course, we cannot completely deny the RPM system, at least 4S shops will provide the pre-sale information and improve service levels after-sales, as the same time the high profits which received by the manufacturers are used on automotive research and development,these are the upside of RPM. But RPM limit market competition and compression the profit of 4S stores,4S stores will focus on the profit of the source of consumers to maintenance their cars, cause the costs of consumer's buying and maintaining cars is too high, result the losses of economic.The Antitrust Law came out in 2008; it makes us have a legal basis on RPM. Similarly, we should also develop a number of supporting regulations and implementation details to make the law can effort on the RPM to develop in the efficient direction, not only in the auto motive sales process, but also in other economic activities.The article starts from the industrial, analyses the RPM between the manufacturers and the distributors, extends to the problems which contains the 4Sstores have difficulties in management and consumers have high cost to hold a car, and discuss the pros and cons from the welfare of consumers. The first half of the article mainly explains the auto market with the relevant circumstances, including the industry chain, car market, car sales, and the RPM in car sales; the latter part of the article pays attention to RPM, which contains the causes, manifestations, impact, and the distress in the 4Sstores and consumers. In the end, I hope the policy recommendations can work in real life.