On the Pricing of Replacement Parts

Max Blouin

No 147, Cahiers de recherche CREFE / CREFE Working Papers from CREFE, Université du Québec à Montréal

Abstract: This paper presents a model in which a good is made up of two parts, and each part asts one or two periods, with known probabilities. The analysis includes consumer decisions regarding part replacement, as well as profit maximization under monopoly and oligipoly. It is found that firms have incentives to supply all part for replacement, rather than force the consumer to replace the entire good when a single part is needed. In oligopoly, the non-collusive equilibrium when parts are not compatible acress brands involves pricing entire goods below marginal cost and individual parts above marginal cost. The paper also puts forward a testable hypothesis about the auto parts market, namely that the emergence of generic auto parts in the 1980s and 1990s may have not only driven down the prices of parts with which they competed, but also driven up the prices of other parts.

Keywords: replacement parts; capital replacement; aftermarkets; compatibility; antitrust. (search for similar items in EconPapers)
JEL-codes: L11 L13 L62 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2002-03
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.unites.uqam.ca/eco/CREFE/cahiers/cah147.pdf Main text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://www.unites.uqam.ca/eco/CREFE/cahiers/cah147.pdf [301 Moved Permanently]--> https://unites.uqam.ca/eco/CREFE/cahiers/cah147.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cre:crefwp:147

Access Statistics for this paper

More papers in Cahiers de recherche CREFE / CREFE Working Papers from CREFE, Université du Québec à Montréal P.O. Box 8888, Downtown Station, Montreal (Canada) Quebec, H3C 3P8. Contact information at EDIRC.
Bibliographic data for series maintained by Stéphane Pallage ().