| This thesis reinterprets a behavior that has been labelled as installed base opportunism. Currently, the courts, based on the Supreme Court case Eastman Kodak Co. vs. Image Technical Services., Inc. (1992), interpret as illegal the behavior of a durable goods manufacturer who changes policy and refuses to sell its proprietary parts preventing third parties from servicing its equipment.; Installed base opportunism describes a manufacturer of a durable good that controls the single source of vital aftermarket parts needed for continued use of the good it sells. The manufacturer under certain circumstances may find it profitable to surprise current owners of the durable good and raise the price of these vital parts or tie the purchase of these parts to service contracts. If the consumers of the durable good did not foresee this behavior and the price increase is less than the switching costs, the consumer is left paying the higher price for parts and service and rents are extracted.; The author proposes an alternative interpretation that this action is rational for the manufacturer, procompetitive, and fulfills an implicit contract between the consumers and the manufacturer. Fundamental to this interpretation is the proposal that the Kodak service network was an unsustainable natural monopoly. It will be shown that a service network operating under these conditions must exclude its competitors in order to achieve the most efficient point of production. Furthermore, any dictate that prevents such exclusion harms rather than helps the ultimate consumer. |
