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Price Discrimination via Proprietary Aftermarkets

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Author Info
Eric Emch (U.S. Dept. of Justice Antitrust Division)
Abstract

Price markups over marginal cost are often higher on aftermarket parts and services for durable goods than they are on the goods themselves. A popular explanation is that the aftermarket good is used as a "metering" device. This paper explores what happens in the metering model as foremarket competition increases, and examines the implications of adding an optional enhancement to the model along with the aftermarket input. It finds that as foremarket competition increases, markups in the aftermarket drop to zero before markups in the foremarket. It also finds that an optional enhancement may expropriate the metering role of an aftermarket input.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Contributions to Economic Analysis & Policy.

Volume (Year): 2 (2003)
Issue (Month): 1 ()
Pages: 1063-1063
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Handle: RePEc:bep:eapcon:v:2:y:2003:i:1:p:1063-1063

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Related research
Keywords: aftermarkets price discrimination two-part tariffs

References listed on IDEAS
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.:

  1. Frank Mathewson & Ralph A. Winter, 1997. "Tying as a Response to Demand Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 566-583, Autumn. [Downloadable!] (restricted)
  2. Stole, Lars A, 1995. "Nonlinear Pricing and Oligopoly," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 4(4), pages 529-62, Winter.
  3. Spulber, Daniel F., 1989. "Product variety and competitive discounts," Journal of Economic Theory, Elsevier, vol. 48(2), pages 510-525, August. [Downloadable!] (restricted)
  4. Morita, Hodaka & Waldman, Michael, 2006. "Competition, Monopoly Maintenance, and Consumer Switching Costs," MPRA Paper 1426, University Library of Munich, Germany. [Downloadable!]
  5. Chen, Z. & Ross, T.W., 1993. "Refusals to deal, Price Discrimination and Independent Service Organizations," Carleton Industrial Organization Research Unit (CIORU) 93-01, Carleton University, Department of Economics.
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  6. Katz, Michael L, 1984. "Price Discrimination and Monopolistic Competition," Econometrica, Econometric Society, vol. 52(6), pages 1453-71, November. [Downloadable!] (restricted)
  7. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
  8. Severin Borenstein & Jeffrey K. Mackie-Mason & Janet S. Netz, 2000. "Exercising Market Power in Proprietary Aftermarkets," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 9(2), pages 157-188, 06. [Downloadable!] (restricted)
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(explanations, 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.)

  1. Pio Baake, 2008. "Accidents, Liability Obligations and Monopolized Markets for Spare Parts : Profits and Social Welfare," Discussion Papers of DIW Berlin 782, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  2. ENCAOUA, David & HOLLANDER, Abraham J., 2005. "First-Degree Discrimination by a Duopoly: Pricing and Quality Choice," Cahiers de recherche 2005-01, Universite de Montreal, Departement de sciences economiques. [Downloadable!]
    Other versions:
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