IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Competition, Monopoly Maintenance, and Consumer Switching Costs

  • Morita, Hodaka
  • Waldman, Michael

Significant attention has been paid to why a durable-goods producer with little or no market power would monopolize the maintenance market for its own product. This paper provides an explanation for this practice that is based on consumer switching costs and the choice of consumers between maintaining and replacing used units. In our explanation, if a firm does not monopolize the maintenance market for its own product, then consumers sometimes maintain used units when it would be efficient for the units to be replaced. In turn, the return to monopolizing the maintenance market is that the practice allows the firm to avoid this inefficiency. An interesting aspect of our analysis that has significant public-policy implications is that, in contrast to most previous explanations for why a durable-goods producer with little or no market power would monopolize the maintenance market for its own product, in our explanation the practice increases rather than decreases both social welfare and consumer welfare.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://mpra.ub.uni-muenchen.de/1426/1/MPRA_paper_1426.pdf
File Function: original version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1426.

as
in new window

Length:
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:pra:mprapa:1426
Contact details of provider: Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: https://mpra.ub.uni-muenchen.de

More information through EDIRC

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.:

as in new window
  1. Dennis W. Carlton & Patrick Greenlee & Michael Waldman, 2008. "Assessing the Anticompetitive Effects of Multiproduct Pricing," NBER Working Papers 14199, National Bureau of Economic Research, Inc.
  2. Elzinga, Kenneth G & Mills, David E, 2001. "Independent Service Organizations and Economic Efficiency," Economic Inquiry, Western Economic Association International, vol. 39(4), pages 549-60, October.
  3. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
  4. 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.
  5. Schmalensee, Richard, 1974. "Market Structure, Durability, and Maintenance Effort," Review of Economic Studies, Wiley Blackwell, vol. 41(2), pages 277-87, April.
  6. Klemperer, Paul, 1989. "Price Wars Caused by Switching Costs," Review of Economic Studies, Wiley Blackwell, vol. 56(3), pages 405-20, July.
  7. Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter.
  8. Michael Waldman, 2010. "Competition, Monopoly, and Aftermarkets," Journal of Law, Economics and Organization, Oxford University Press, vol. 26(1), pages 54-91, April.
  9. Hodaka Morita & Michael Waldman, 2004. "Durable Goods, Monopoly Maintenance, and Time Inconsistency," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(2), pages 273-302, 06.
  10. Butz, David A, 1990. "Durable-Good Monopoly and Best-Price Provisions," American Economic Review, American Economic Association, vol. 80(5), pages 1062-76, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:1426. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.