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Competition, Monopoly, and Aftermarkets

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Author Info
Dennis W. Carlton
Michael Waldman

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Abstract

Consider a durable goods producer that potentially has market power in the aftermarkets associated with its products. An important question is to what extent, if any, should the antitrust laws restrict the firm's behavior in these aftermarkets? In this paper we explore a number of models characterized by either competition or monopoly in the new-unit market, and show that a variety of behaviors that hurt competition in aftermarkets can, in fact, be efficient responses to potential inefficiencies that can arise in aftermarkets. Our results should give courts pause before intervening in aftermarkets.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8086.

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Date of creation: Jan 2001
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Handle: RePEc:nbr:nberwo:8086

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L - Industrial Organization

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. Waldman, Michael, 1997. "Eliminating the Market for Secondhand Goods: An Alternative Explanation for Leasing," Journal of Law & Economics, University of Chicago Press, vol. 40(1), pages 61-92, April.
  2. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Blackwell Publishing, vol. 62(4), pages 515-39, October. [Downloadable!] (restricted)
  3. Klemperer, Paul, 1989. "Price Wars Caused by Switching Costs," Review of Economic Studies, Blackwell Publishing, vol. 56(3), pages 405-20, July. [Downloadable!] (restricted)
  4. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April. [Downloadable!] (restricted)
  5. 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)
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  6. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law & Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
  7. Klemperer, Paul, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 375-94, May. [Downloadable!] (restricted)
  8. Mallela, Parthasaradhi & Nahata, Babu, 1980. "Theory of Vertical Control with Variable Proportions," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 1009-25, October. [Downloadable!] (restricted)
  9. Zhiqi Chen & Thomas W. Ross, 1998. "Orders to Supply as Substitutes for Commitments to Aftermarkets," Canadian Journal of Economics, Canadian Economics Association, vol. 31(5), pages 1204-1224, November. [Downloadable!] (restricted)
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  10. Zhiqi Chen & Thomas Ross & W. Stanbury, 1998. "Refusals to Deal and Aftermarkets," Review of Industrial Organization, Springer, vol. 13(1), pages 131-151, April. [Downloadable!] (restricted)
  11. Farrell, Joseph & Shapiro, Carl, 1989. "Optimal Contracts with Lock-In," American Economic Review, American Economic Association, vol. 79(1), pages 51-68, March. [Downloadable!] (restricted)
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  12. Nancy L. Stokey, 1981. "Rational Expectations and Durable Goods Pricing," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 112-128, Spring. [Downloadable!] (restricted)
  13. Drew Fudenberg & Jean Tirole, 1998. "Upgrades, Tradeins, and Buybacks," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 235-258, Summer. [Downloadable!] (restricted)
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  14. Chen, Zhiqi & Ross, Thomas W, 1993. "Refusals to Deal, Price Discrimination, and Independent Service Organizations," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 2(4), pages 593-614, Winter.
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  15. Su, Teddy T, 1975. "Durability of Consumption Goods Reconsidered," American Economic Review, American Economic Association, vol. 65(1), pages 148-57, March. [Downloadable!] (restricted)
  16. Waldman, Michael, 1996. "Durable Goods Pricing When Quality Matters," Journal of Business, University of Chicago Press, vol. 69(4), pages 489-510, October. [Downloadable!] (restricted)
  17. Schmalensee, Richard, 1974. "Market Structure, Durability, and Maintenance Effort," Review of Economic Studies, Blackwell Publishing, vol. 41(2), pages 277-87, April. [Downloadable!] (restricted)
  18. Igal Hendel & Alessandro Lizzeri, 1999. "Interfering with Secondary Markets," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 1-21, Spring. [Downloadable!] (restricted)
  19. Rust, John, 1986. "When Is It Optimal to Kill Off the Market for Used Durable Goods?," Econometrica, Econometric Society, vol. 54(1), pages 65-86, January. [Downloadable!] (restricted)
  20. Morita, Hodaka & Waldman, Michael, 2006. "Competition, Monopoly Maintenance, and Consumer Switching Costs," MPRA Paper 1426, University Library of Munich, Germany. [Downloadable!]
Full references

Cited by:
(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. Giovanni Goldoni, 2007. "La gestione dei rifiuti da apparecchiature elettriche ed elettroniche dopo la direttiva 2002/96/CE," Working Papers 43, Università di Verona, Dipartimento di Scienze economiche. [Downloadable!]
  2. Luis Cabral, 2008. "Aftermarket Power and Basic Market Competition," Working Papers 08-20, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
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  3. 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!]
  4. Morita, Hodaka & Waldman, Michael, 2006. "Competition, Monopoly Maintenance, and Consumer Switching Costs," MPRA Paper 1426, University Library of Munich, Germany. [Downloadable!]
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