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Repair Market Structure, Product Durability, and Monopoly
Author(s) -
Kinokuni Hiroshi
Publication year - 1999
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/1467-8454.00061
Subject(s) - commit , monopolistic competition , durable good , monopoly , competitor analysis , market share , microeconomics , product (mathematics) , perfect competition , durability , industrial organization , business , product market , distortion (music) , economics , marketing , computer science , incentive , amplifier , geometry , mathematics , database , computer network , bandwidth (computing)
This paper shows that a durable goods monopolist makes consumers choose a level of repairs which is below the socially optimal level if it monopolises the repair market as well. This distortion occurs due to the possibility of substituting new and used goods and a time inconsistency problem concerning repair decisions. However, if the monopolist is unable to commit the repair price, it may prefer to invite competitors into the repair market. If the repair market is competitive, even when the product market is monopolistic, the socially optimal level of repairs, and thus also the socially optimal durability level is chosen.