Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/27306 
Authors: 
Year of Publication: 
2008
Series/Report no.: 
DIW Discussion Papers No. 782
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
We analyze the effects of accidents and liability obligations on the incentives of car manufacturers to monopolize the markets for their spare parts. We show that monopolized markets for spare parts lead to higher overall expenditures for consumers. Furthermore, while the manufacturers invest more in order to offer cars with higher qualities, monopolization tends to reduce social welfare. Key for these results is the observation that high prices for spare parts entail a negative external effect inasmuch as liability obligations imply that consumers of competing products have to pay the high prices as well.
Subjects: 
aftermarkets
monopolization
liability
JEL: 
L13
L42
D43
Document Type: 
Working Paper

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