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Aftermarket power and foremarket competition

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  • Cabral, Luís

Abstract

I revisit the issue of aftermarkets by developing an infinite period model with overlapping consumers. If the aftermarket is characterized by constant returns to scale, then social surplus and consumer surplus are invariant with respect to aftermarket power. Under increasing returns to scale, however, greater aftermarket power leads to: greater concentration in the foremarket; higher barriers to entry; higher social surplus; and possibly higher consumer surplus.

Suggested Citation

  • Cabral, Luís, 2014. "Aftermarket power and foremarket competition," International Journal of Industrial Organization, Elsevier, vol. 35(C), pages 60-69.
  • Handle: RePEc:eee:indorg:v:35:y:2014:i:c:p:60-69
    DOI: 10.1016/j.ijindorg.2014.06.004
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    References listed on IDEAS

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    1. repec:kap:revind:v:50:y:2017:i:4:d:10.1007_s11151-017-9571-2 is not listed on IDEAS

    More about this item

    Keywords

    Aftermarkets; Dynamic price competition; Market power;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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