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Accidents, Liability Obligations and Monopolized Markets for Spare Parts

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  • Baake, Pio

Abstract

We analyze the effects of accidents and liability obligations on the incentives of car manufacturers to monopolize the markets for their spare parts. We show that monopolized markets for spare parts lead to inefficiently high prices for spare parts. Furthermore, monopolization induces the manufacturers to choose inefficiently high qualities. The key for these results is the observation that high prices for spare parts entail a negative external effect inasmuch as liability obligations imply that consumers of competing products have to pay the high prices as well.

Suggested Citation

  • Baake, Pio, 2010. "Accidents, Liability Obligations and Monopolized Markets for Spare Parts," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 10(1), pages 1-24.
    • Handle: RePEc:zbw:espost:142252
    DOI: 10.2202/1935-1682.2080
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    4. Zhiqi Chen & Thomas Ross & W. Stanbury, 1998. "Refusals to Deal and Aftermarkets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 13(1), pages 131-151, April.
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