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Competition, Monopoly, and AftermarketsDennis W. CarltonUniversity of Chicago - Booth School of Business; National Bureau of Economic Research (NBER) Michael WaldmanCornell University - Samuel Curtis Johnson Graduate School of Management April 2010 The Journal of Law, Economics, & Organization, Vol. 26, Issue 1, pp. 54-91, 2010 Abstract: Consider a durable goods producer that has the option of monopolizing an aftermarket such as repair for its own product. An important question is whether such monopolization reduces welfare? We show that the answer to this question is frequently no. In particular, we explore three models that illustrate various ways in which aftermarket monopolization can reduce inefficiencies and thus increase social welfare and frequently also consumer welfare. Our article shows that efficiency enhancing aftermarket monopolization may be much more common than previous literature suggests.
JEL Classification: K21, L12, L49 Accepted Paper SeriesDate posted: February 22, 2010Suggested CitationContact Information
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