Competition, Monopoly, and Aftermarkets

Consider a durable goods producer that potentially has market power in the aftermarkets associated with its products. An important question is to what extent, if any, should the antitrust laws restrict the firm's behavior in these aftermarkets? In this paper we explore a number of models characterized by either competition or monopoly in the new-unit market, and show that a variety of behaviors that hurt competition in aftermarkets can, in fact, be efficient responses to potential inefficiencies that can arise in aftermarkets. Our results should give courts pause before intervening in aftermarkets.