Orders to supply as substitutes for commitments to aftermarkets
Canadian Journal of Economics , Volume 31 - Issue 5 p. 1204- 1224
A number of recent antitrust cases in Canada and other countries have involved durable goods manufacturers refusing to supply proprietary parts to independent service organizations. Earlier work suggested that the inability of manufacturers to commit to low aftermarket prices creates an inefficiency that might be removed by a judicial order to supply. This paper examines this view critically with a specific model of repairs and demonstrates that under plausible conditions there is no welfare loss due to the inability to commit. It goes on to show that an order to supply can create its own distortion and welfare loss if it encourages inefficient substitution of inputs in the production of repairs.