Do MSRPs decrease prices?

The nature of manufacturer's suggested retail prices (MSRPs) and whether they increase or decrease prices is poorly understood. We exploit a policy experiment in which a ban on MSRPs was imposed and then lifted a year later, and show that MSRPs decrease prices by 3.6 percent on average. There is no indication that MSRPs lowered prices by acting as binding price ceilings. Instead we find suggestive evidence that MSRPs are aimed at consumers, possibly providing a benchmark by which consumers can evaluate prices.