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Tying and entry deterrence in vertically differentiated markets

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  • Eugen Kovac

Abstract

This paper analyzes tying and bundling as an entry deterrence tool. It shows that a multi-product firm can defend its monopoly position in one market via tying even when it does not have market power in another market. This is shown on a model with two complementary goods, each of which is vertically differentiated and in which consumers’ preferences for the goods are positively correlated. Some possible ways of defending against entry deterrence, and implications for competition policy, are discussed.

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Bibliographic Info

Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp266.

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Date of creation: Aug 2005
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Handle: RePEc:cer:papers:wp266

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Related research

Keywords: Industrial organization; vertical differentiation; anti-trust policy; entry deterrence; foreclosure; tying; bundling.;

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  1. Dennis W. Carlton & Michael Waldman, 2002. "The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 194-220, Summer.
  2. Choi, Jay Pil & Stefanadis, Christodoulos, 2001. "Tying, Investment, and the Dynamic Leverage Theory," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 52-71, Spring.
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