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When Does Aftermarket Monopolization Soften Foremarket Competition?

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  • Yuk‐fai Fong
  • Jin Li
  • Ke Liu

Abstract

This paper investigates firms' abilities to tacitly collude when they each monopolize a proprietary aftermarket. When firms' aftermarkets are completely isolated from foremarket competition, they cannot tacitly collude more easily than single‐product firms. However, when their aftermarket power is contested by foremarket competition as equipment owners view new equipment as a substitute for their incumbent firm's aftermarket product, profitable tacit collusion is sustainable among a larger number of firms. Conditions under which introduction of aftermarket competition hinders firms' ability to tacitly collude are characterized.

Suggested Citation

  • Yuk‐fai Fong & Jin Li & Ke Liu, 2016. "When Does Aftermarket Monopolization Soften Foremarket Competition?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(4), pages 852-879, December.
    • Handle: RePEc:bla:jemstr:v:25:y:2016:i:4:p:852-879
    DOI: 10.1111/jems.12167
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    References listed on IDEAS

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    Cited by:

    1. Keisuke Hattori & Keisaku Higashida, 2023. "Who should be regulated: Genuine producers or third parties?," Journal of Economics, Springer, vol. 138(3), pages 249-286, April.

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