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Independent Service Organizations and Economic Efficiency

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  • Elzinga, Kenneth G
  • Mills, David E

Abstract

Following the Supreme Court's Kodak decision, numerous antitrust cases have revolved around practices of manufacturers which deter independent service organizations (ISOs) from servicing the manufacturer's equipment. Such practices include tying equipment sales to service, tying service sales to other "aftermarket" products, and refusing to sell replacement parts to ISOs. We show that interbrand systems competition without ISOs curbs service and equipment price distortions and, under plausible conditions, confers greater benefits to users of durable equipment than intrabrand service competition with ISOs. Hence, the effect of manufacturers' practices that foreclose ISOs from service aftermarkets can be efficiency promoting rather than anticompetitive. Copyright 2001 by Oxford University Press.

Suggested Citation

  • Elzinga, Kenneth G & Mills, David E, 2001. "Independent Service Organizations and Economic Efficiency," Economic Inquiry, Western Economic Association International, vol. 39(4), pages 549-560, October.
  • Handle: RePEc:oup:ecinqu:v:39:y:2001:i:4:p:549-60
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    Cited by:

    1. Miao, Chun-Hui, 2010. "Consumer myopia, standardization and aftermarket monopolization," European Economic Review, Elsevier, vol. 54(7), pages 931-946, October.
    2. Michael Waldman, 2004. "Antitrust Perspectives for Durable-Goods Markets," CESifo Working Paper Series 1306, CESifo Group Munich.
    3. Hodaka Morita & Michael Waldman, 2010. "Competition, Monopoly Maintenance, and Consumer Switching Costs," American Economic Journal: Microeconomics, American Economic Association, vol. 2(1), pages 230-255, February.
    4. Shastitko, A., 2012. "Competition on Aftermarkets: the Subject Matter and Policy Applications," Journal of the New Economic Association, New Economic Association, vol. 16(4), pages 104-126.
    5. David L. Kaserman, 2007. "Efficient Durable Good Pricing And Aftermarket Tie-In Sales," Economic Inquiry, Western Economic Association International, vol. 45(3), pages 533-537, July.

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