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Price Discrimination via Proprietary Aftermarkets
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Eric R. Emch
Published/Copyright:
April 2, 2003
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.
Published Online: 2003-4-2
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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- Contributions Article
- Suggested Subsidies are Sub-optimal Unless Combined with an Output Tax
- War or Peace
- Selective Information Provision and Special Interest Influence: The Case of Trade Policy
- Price Discrimination via Proprietary Aftermarkets
- The Spite Motive and Equilibrium Behavior in Auctions
- Optimal Liability for Libel
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- The Savings Impact of College Financial Aid
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- Oligopoly Deregulation and the Taxation of Commodities
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