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Article
Price Discrimination via Proprietary Aftermarkets
The B.E. Journal of Economic Analysis & Policy (2007)
  • Eric R. Emch
Abstract
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.
Keywords
  • aftermarkets,
  • price discrimination,
  • two-part tariffs
Publication Date
February, 2007
Citation Information
Eric R. Emch. "Price Discrimination via Proprietary Aftermarkets" The B.E. Journal of Economic Analysis & Policy Vol. 2 Iss. 1 (2007)
Available at: http://works.bepress.com/eric_emch/1/