Competition, Monopoly Maintenance, and Consumer Switching Costs

Hodaka Morita () and Michael Waldman

American Economic Journal: Microeconomics, 2010, vol. 2, issue 1, 230-55

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)

JEL-codes: D42 D43 D82 K21 L12 L42 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/mic.2.1.230
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Citations: View citations in EconPapers (3)

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Working Paper: Competition, Monopoly Maintenance, and Consumer Switching Costs (2006)
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