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When Does Aftermarket Monopolization Soften Foremarket Competition?
Wiley Periodicals
Authors: Prof Yuk-fai FONG, Jin Li, Ke Liu
Year published: 2016

"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 firms 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."

This is a working paper version. The published version could be found here.