Competition, Monopoly Maintenance, and Consumer Switching Costs
AbstractSignificant attention has been paid to why a durable goods producer with little or no market power would monopolize the maintenance market for its own product. This paper investigates an explanation for the practice based on consumer switching costs and the decision concerning maintaining versus replacing used units. In our explanation, if the maintenance market is not monopolized, consumers sometimes maintain used units that are more efficiently replaced. In turn, monopolizing the maintenance market avoids this inefficiency. In contrast to most previous explanations for the practice, in our explanation, the practice increases both social and consumer welfare. (JEL D42, D43, D82, K21, L12, L42)
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Journal: Microeconomics.
Volume (Year): 2 (2010)
Issue (Month): 1 (February)
Other versions of this item:
- Morita, Hodaka & Waldman, Michael, 2006. "Competition, Monopoly Maintenance, and Consumer Switching Costs," MPRA Paper 1426, University Library of Munich, Germany.
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter.
- Michael Waldman, 2010.
"Competition, Monopoly, and Aftermarkets,"
Journal of Law, Economics and Organization,
Oxford University Press, vol. 26(1), pages 54-91, April.
- Butz, David A, 1990. "Durable-Good Monopoly and Best-Price Provisions," American Economic Review, American Economic Association, vol. 80(5), pages 1062-76, December.
- Klemperer, Paul, 1989. "Price Wars Caused by Switching Costs," Review of Economic Studies, Wiley Blackwell, vol. 56(3), pages 405-20, July.
- Dennis W. Carlton & Michael Waldman, 2001.
"Competition, Monopoly, and Aftermarkets,"
NBER Working Papers
8086, National Bureau of Economic Research, Inc.
- Keisuke Hattori & Amihai Glazer, 2013. "How to Commit to a Future Price," Working Papers 131402, University of California-Irvine, Department of Economics.
- Michael Waldman, 2004. "Antitrust Perspectives for Durable-Goods Markets," CESifo Working Paper Series 1306, CESifo Group Munich.
- Shastitko, A., 2012. "Competition on Aftermarkets: the Subject Matter and Policy Applications," Journal of the New Economic Association, New Economic Association, vol. 16(4), pages 104-126.
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