Tying as a Response to Demand Uncertainty
AbstractThis article examines requirements tying of a competitively supplied good to a monopolized good. It expands the set of market conditions in which this instrument is known to be profitable. With heterogeneous, privately informed buyers, a firm can profit by tying two goods even when demands for the goods are price independent - providing the demands are stochastically dependent. We investigate the profitability of tying as a response to stochastic demand, as well as the effects of tying on prices and the extent of the market served.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 28 (1997)
Issue (Month): 3 (Autumn)
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Web page: http://www.rje.org
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