Aftermarket power and foremarket competition

- Under IRS, aftermarket power implies foremarket concentration.
- Aftermarket power also leads to higher social surplus.
- Aftermarket power may lead to higher consumer surplus.

I revisit the issue of aftermarkets by developing an infinite period model with overlapping consumers. If the aftermarket is characterized by constant returns to scale, then social surplus and consumer surplus are invariant with respect to aftermarket power. Under increasing returns to scale, however, greater aftermarket power leads to: greater concentration in the foremarket; higher barriers to entry; higher social surplus; and possibly higher consumer surplus.