Orders to Supply as Substitutes for Commitments to Aftermarkets
AbstractA number of recent antitrust cases in Canada and other countries have involved durable goods manufacturers refusing to supply proprietary parts to independent service organizations. Earlier work suggested that the inability of manufacturers to commit to low aftermarket prices creates an inefficiency that might be removed by a judicial order to supply. This paper examines this view critically with a specific model of repairs and demonstrates that under plausible conditions there is no welfare loss due to the inability to commit. It goes on to show that an order to supply can create its own distortion and welfare loss if it encourages inefficient substitution of inputs in the production of repairs.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 31 (1998)
Issue (Month): 5 (November)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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Other versions of this item:
- Zhiqi Chen & Tom Ross, 1996. "Orders to Supply as Substitutes for Commitments to Aftermarkets," Carleton Industrial Organization Research Unit (CIORU), Carleton University, Department of Economics 96-02, Carleton University, Department of Economics.
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
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