Aftermarkets : the monopoly case

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Aftermarkets : the monopoly case

Author Info

Bijl, P. de (Tilburg University, Center for Economic Research)

Additional information is available for the following registered author(s):

Paul W.J. de Bijl

Abstract

Consider a monopolist who sells a durable good, and repairs the good if it breaks down. Suppose that contracts that specify future repair prices cannot be written, so that there is an aftermarket" situation. When consumers are risk-averse, the monopolist chooses inefficiently high repair prices; if complete warranties were possible, he would fully insure consumers by guaranteeing to repair the good at a zero fee. To increase efficiency, the monopolist may attract a rival firm in the aftermarket, or lease the good. The latter option restores first-best efficiency

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 102.

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Date of creation: 1995
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Handle: RePEc:dgr:kubcen:1995102

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Keywords: Repair;

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Find related papers by JEL classification:
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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Joseph Farrell & Carl Shapiro, 1988. "Dynamic Competition with Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 123-137, Spring. [Downloadable!] (restricted)
Other versions:
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Other versions:
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Other versions:
- Joseph Farrell and Carl Shapiro., 1987. "Optimal Contracts with Lock-In," Economics Working Papers 8758, University of California at Berkeley.
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Other versions:
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