Efficient Durable Good Pricing and Aftermarket Tie-In Sales

5 Pages Posted: 26 Jun 2007

See all articles by David L. Kaserman

David L. Kaserman

Auburn University - Department of Economics

Abstract

The conditions under which a durable good supplier employs a tying arrangement that binds aftermarket purchases to the original sale was a central issue in the Kodak case. Two competing theories were presented in that case. Importantly, neither of these provides an efficiency-based explanation for the observed behavior. Subsequent theories provide several efficiency-driven motivations for aftermarket tying. None of these, however, rely upon efficient contracting between the buyer and the seller of the durable good. This article demonstrates the conditions under which such a contract will contain an aftermarket tie-in provision.

Suggested Citation

Kaserman, David L., Efficient Durable Good Pricing and Aftermarket Tie-In Sales. Economic Inquiry, Vol. 45, No. 3, pp. 533-537, July 2007, Available at SSRN: https://ssrn.com/abstract=994416 or http://dx.doi.org/10.1111/j.1465-7295.2007.00022.x

David L. Kaserman (Contact Author)

Auburn University - Department of Economics

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