A LONG-STANDING puzzle to economists is that some manufacturers prefer that their products are sold at not less than "fair trade" retail prices.' Before the courts upset the legal status of resale price maintenance, some of these manufacturers spent millions to prevent distributors from selling their products below the list price. The manufacturers' interests seem to be best served when distributors resell their products under such competitive conditions as may exist at the level of distribution and at the lowest prices resulting from that competition. If manufacturers set a floor to the resale price then they also set a ceiling to their sales and thus apparently support a policy that runs counter to their own self-interest. Let the manufacturers fix a price at the factory gate at which all distributors may buy the product. Would not the manufacturers' sales and profits be greater the lower is the price at which distributors resell their products to consumers? If so, then what explains the strong desire of some manufacturers to prevent distributors from