Final answer:
A minimum resale price maintenance agreement sets the lowest price at which a product can be sold by retailers, which can reduce competition by standardizing prices but can be justified if it benefits consumers or small retailers.
Step-by-step explanation:
A minimum resale price maintenance (RPM) agreement is a policy set by a manufacturer or supplier that stipulates the lowest price at which a retailer can sell its product. This type of agreement can, under certain circumstances, potentially reduce competition by preventing retailers from offering lower prices, thus minimizing price-driven consumer choices. From a competitive standpoint, RPM agreements can lead to anticompetitive effects, such as price fixing, as they may establish a market-wide floor on pricing. However, there are scenarios where such agreements might be deemed acceptable, particularly if they can be justified by the benefits they provide, such as enabling smaller retailers to compete by providing service and educational benefits to consumers, or to ensure that the price reflects the true value of a product or service which requires a certain level of service or support.