IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_2073.html
   My bibliography  Save this paper

Tying in Two-Sided Markets with Multi-Homing

Author

Listed:
  • Jay Pil Choi

Abstract

This paper analyzes the effects of tying arrangements on market competition and social welfare in two-sided markets when economic agents can engage in multi-homing; that is, they can participate in multiple platforms in order to reap maximal network benefits. The model shows that tying induces more consumers to multi-home and makes platform-specific exclusive contents available to more consumers, which is also beneficial to content providers. As a result, tying can be welfare-enhancing if multi-homing is allowed, even in cases where its welfare impacts are negative in the absence of multi-homing. The analysis thus can have important implications for recent antitrust cases in industries where multi-homing is prevalent.

Suggested Citation

  • Jay Pil Choi, 2007. "Tying in Two-Sided Markets with Multi-Homing," CESifo Working Paper Series 2073, CESifo.
    • Handle: RePEc:ces:ceswps:_2073
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp2073.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Chen, Yongmin, 1997. "Equilibrium Product Bundling," The Journal of Business, University of Chicago Press, vol. 70(1), pages 85-103, January.
    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.
    3. Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 31, pages 1967-2072, Elsevier.
    4. 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.
    5. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, September.
    6. Jay Pil Choi, 2004. "Tying and innovation: A dynamic analysis of tying arrangements," Economic Journal, Royal Economic Society, vol. 114(492), pages 83-101, January.
    7. Rochet, Jean Charles & Tirole, Jean, 2008. "Tying in two-sided markets and the honor all cards rule," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1333-1347, November.
    8. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, September.
    9. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
    10. Caillaud, Bernard & Jullien, Bruno, 2003. "Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-328, Summer.
    11. Jay Pil Choi, 1996. "Preemptive R&D, Rent Dissipation, and the "Leverage Theory"," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(4), pages 1153-1181.
    12. Juan D. Carrillo & Guofu Tan, 2006. "Platform Competition: The Role of Multi-homing and Complementors," Working Papers 06-30, NET Institute, revised Oct 2006.
    13. Whinston, Michael D, 1990. "Tying, Foreclosure, and Exclusion," American Economic Review, American Economic Association, vol. 80(4), pages 837-859, September.
    14. Carbajo, Jose & de Meza, David & Seidmann, Daniel J, 1990. "A Strategic Motivation for Commodity Bundling," Journal of Industrial Economics, Wiley Blackwell, vol. 38(3), pages 283-298, March.
    15. Mark Armstrong & Julian Wright, 2007. "Two-sided Markets, Competitive Bottlenecks and Exclusive Contracts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(2), pages 353-380, August.
    16. Doganoglu, Toker & Wright, Julian, 2010. "Exclusive dealing with network effects," International Journal of Industrial Organization, Elsevier, vol. 28(2), pages 145-154, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Choi, Jay Pil & Jeon, Doh-Shin, 2016. "A Leverage Theory of Tying in Two-Sided Markets," TSE Working Papers 16-689, Toulouse School of Economics (TSE), revised Oct 2019.
    2. David S. Evans & Richard Schmalensee, 2013. "The Antitrust Analysis of Multi-Sided Platform Businesses," NBER Working Papers 18783, National Bureau of Economic Research, Inc.
    3. Jay Pil Choi, 2004. "Antitrust Analysis of Tying Arrangements," CESifo Working Paper Series 1336, CESifo.
    4. Jihui Chen & Qiang Fu, 2017. "Do exclusivity arrangements harm consumers?," Journal of Regulatory Economics, Springer, vol. 51(3), pages 311-339, June.
    5. Jullien, Bruno & Sand-Zantman, Wilfried, 2021. "The Economics of Platforms: A Theory Guide for Competition Policy," Information Economics and Policy, Elsevier, vol. 54(C).
    6. Subhasish M. Chowdhury & Stephen Martin, 2017. "Exclusivity and exclusion on platform Markets," Journal of Economics, Springer, vol. 120(2), pages 95-118, March.
    7. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, January.
    8. Oliver Budzinski & Katharina Wacker, 2007. "The Prohibition Of The Proposed Springer-Prosiebensat.1 Merger: How Much Economics In German Merger Control?," Journal of Competition Law and Economics, Oxford University Press, vol. 3(2), pages 281-306.
    9. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 34, pages 2221-2299, Elsevier.
    10. Rochet, Jean Charles & Tirole, Jean, 2008. "Tying in two-sided markets and the honor all cards rule," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1333-1347, November.
    11. Paul Belleflamme & Eric Toulemonde, 2009. "Negative Intra-Group Externalities In Two-Sided Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 245-272, February.
    12. Carrillo, Juan D. & Tan, Guofu, 2021. "Platform competition with complementary products," International Journal of Industrial Organization, Elsevier, vol. 77(C).
    13. Jullien, Bruno & Pavan, Alessandro, 2013. "Platform Pricing under Dispersed Information," IDEI Working Papers 793, Institut d'Économie Industrielle (IDEI), Toulouse.
    14. Jullien, Bruno & Pavan, Alessandro & Rysman, Marc, 2021. "Two-sided Markets, Pricing, and Network Effects," TSE Working Papers 21-1238, Toulouse School of Economics (TSE).
    15. Fan, Rong & Ban, Xuegang (Jeff), 2022. "Commuting service platform: Concept and analysis," Transportation Research Part B: Methodological, Elsevier, vol. 158(C), pages 18-51.
    16. Rey, Patrick & Tirole, Jean, 2007. "A Primer on Foreclosure," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 33, pages 2145-2220, Elsevier.
    17. Andrea Mantovani, 2013. "The Strategic Effect of Bundling: A New Perspective," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(1), pages 25-43, February.
    18. Xie, Jiaping & Zhu, Weijun & Wei, Lihong & Liang, Ling, 2021. "Platform competition with partial multi-homing: When both same-side and cross-side network effects exist," International Journal of Production Economics, Elsevier, vol. 233(C).
    19. Peitz, Martin, 2008. "Bundling may blockade entry," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 41-58, January.
    20. Saruta, Fuyuki, 2021. "Exclusive contracts and multihoming agents in two-sided markets," MPRA Paper 110070, University Library of Munich, Germany.

    More about this item

    Keywords

    tying; two-sided markets; (indirect) network effects; multi-homing;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_2073. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.