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American Economic Journal: Microeconomics: Vol. 2 No. 1 (February 2010)
AEJ: Micro Volume. 2, Issue 1 | 
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AEJ: Micro Forthcoming Articles
Competition, Monopoly Maintenance, and Consumer Switching Costs
Article Citation
Morita, Hodaka, and
Michael Waldman. 2010. "Competition, Monopoly Maintenance, and Consumer Switching Costs."
American Economic Journal: Microeconomics,
2(1): 230-55.
DOI: 10.1257/mic.2.1.230
DOI: 10.1257/mic.2.1.230
Abstract
Significant attention has been paid to why a durable goods producer
with little or no market power would monopolize the maintenance
market for its own product. This paper investigates an explanation
for the practice based on consumer switching costs and the decision
concerning maintaining versus replacing used units. In our explanation,
if the maintenance market is not monopolized, consumers
sometimes maintain used units that are more efficiently replaced. In
turn, monopolizing the maintenance market avoids this inefficiency.
In contrast to most previous explanations for the practice, in our
explanation, the practice increases both social and consumer welfare.
(JEL D42, D43, D82, K21, L12, L42)
Article Full-Text Access
Full-text Article
Additional Materials
Online Appendix (109.96 KB)
Authors
Morita, Hodaka (U New South Wales)
Waldman, Michael (Cornell U)
Waldman, Michael (Cornell U)
JEL Classifications
D42: Market Structure and Pricing: Monopoly
D43: Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection
D82: Asymmetric and Private Information
K21: Antitrust Law
L12: Monopoly; Monopolization Strategies
L42: Vertical Restraints; Resale Price Maintenance; Quantity Discounts
D43: Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection
D82: Asymmetric and Private Information
K21: Antitrust Law
L12: Monopoly; Monopolization Strategies
L42: Vertical Restraints; Resale Price Maintenance; Quantity Discounts
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