Demerits of resale price maintenance

  • It erodes the consumer surplus for the buyers.
  • It reduces the role of the price mechanism in resource allocation.
  • It reduces the profit margins of the retailers.
  • It over-burdens the retailer who must sell large quantities to increase the earnings.
  • May create malpractice of hoarding and black market.
  • The retailer makes losses where the operational costs are high.