Work

Interfering with Secondary Markets

Year: 1999

Type: article

Abstract: We present a model to address in a unified manner four ways in which a monopolist can interfere with secondary markets. In the model, consumers have heterogeneous valuations for quality so that used-good markets play an allocative role. Our results are the following: (1) In contrast to Swan's famous independence result, a monopolist does not provide socially optimal durability. (2) Allowing the monopolist to rent does not restore socially optimal durability and increases the monopolist's market power in the used market. However, forcing the monopolist to sell the goods may be a bad policy because it would lead to either lower output or lower durability. (3) The manufacturer benefits from a well functioning used-good market despite the fact that used goods provide competition for new goods. (4) The monopolist prefers to restrict consumers' abilities to maintain the good.

Source: The RAND Journal of Economics

DOI: 10.2307/2556043

Authors: Igal Hendel, Alessandro Lizzeri

Institutions: Northwestern University, National Bureau of Economic Research, Northwestern University, New York University

Language: English

Topic: Merger and Competition Analysis

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W1985708158

FWCI: 11.49

Cites:

Cited by: 219

Related to: 10