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Price Discrimination via Proprietary Aftermarkets

Author

Listed:
  • Emch Eric R.

    (U.S. Dept. of Justice Antitrust Division)

Abstract

Price markups over marginal cost are often higher on aftermarket parts and services for durable goods than they are on the goods themselves. A popular explanation is that the aftermarket good is used as a "metering" device. This paper explores what happens in the metering model as foremarket competition increases, and examines the implications of adding an optional enhancement to the model along with the aftermarket input. It finds that as foremarket competition increases, markups in the aftermarket drop to zero before markups in the foremarket. It also finds that an optional enhancement may expropriate the metering role of an aftermarket input.

Suggested Citation

  • Emch Eric R., 2003. "Price Discrimination via Proprietary Aftermarkets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 2(1), pages 1-32, April.
    • Handle: RePEc:bpj:bejeap:v:contributions.2:y:2003:i:1:n:4
    DOI: 10.2202/1538-0645.1063
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    Citations

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    Cited by:

    1. James D. Reitzes & Glenn A. Woroch, 2008. "Competition for exclusive customers: comparing equilibrium and welfare under one‐part and two‐part pricing," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(3), pages 1046-1086, August.
    2. Miao, Chun-Hui, 2010. "Consumer myopia, standardization and aftermarket monopolization," European Economic Review, Elsevier, vol. 54(7), pages 931-946, October.
    3. Ahmadi, Iman & Skiera, Bernd & Lambrecht, Anja & Heubrandner, Florian, 2017. "Time preferences and the pricing of complementary durables and consumables," International Journal of Research in Marketing, Elsevier, vol. 34(4), pages 813-828.
    4. Encaoua David & Hollander Abraham, 2007. "First-Degree Discrimination by a Duopoly: Pricing and Quality Choice," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-21, May.
    5. Baake Pio, 2010. "Accidents, Liability Obligations and Monopolized Markets for Spare Parts," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-26, May.
    6. Pio Baake, 2008. "Accidents, Liability Obligations and Monopolized Markets for Spare Parts: Profits and Social Welfare," Discussion Papers of DIW Berlin 782, DIW Berlin, German Institute for Economic Research.
    7. David Encaoua & Abraham Hollander, 2004. "First degree discrimination in a competitive setting: pricing and quality choice," Post-Print halshs-00193447, HAL.

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