Competition, Monopoly, and Aftermarkets

Posted: 22 Feb 2010

See all articles by Dennis W. Carlton

Dennis W. Carlton

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Michael Waldman

Cornell University - Samuel Curtis Johnson Graduate School of Management

Multiple version iconThere are 3 versions of this paper

Date Written: April 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

Suggested Citation

Carlton, Dennis W. and Waldman, Michael, Competition, Monopoly, and Aftermarkets (April 2010). The Journal of Law, Economics, & Organization, Vol. 26, Issue 1, pp. 54-91, 2010. Available at SSRN: https://ssrn.com/abstract=1555540 or http://dx.doi.org/10.1093/jleo/ewp006

Dennis W. Carlton (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
312-322-0215 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Michael Waldman

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States
607-255-8631 (Phone)

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