When Does Aftermarket Monopolization Soften Foremarket Competition?

Yuk Fai Fong, Jin Li, Ke Liu

Research output: Contribution to journalArticlepeer-review

Abstract

This paper investigates firms' abilities to tacitly collude when they each monopolize a proprietary aftermarket. When firms' aftermarkets are completely isolated from foremarket competition, they cannot tacitly collude more easily than single-product firms. However, when their aftermarket power is contested by foremarket competition as equipment owners view new equipment as a substitute for their incumbent firm's aftermarket product, profitable tacit collusion is sustainable among a larger number of firms. Conditions under which introduction of aftermarket competition hinders firms' ability to tacitly collude are characterized.

Original languageEnglish (US)
Pages (from-to)852-879
Number of pages28
JournalJournal of Economics and Management Strategy
Volume25
Issue number4
DOIs
StatePublished - Dec 1 2016

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Strategy and Management
  • Management of Technology and Innovation

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