Tying in Two-Sided Markets with Multi-Homing

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Tying in Two-Sided Markets with Multi-Homing

Author Info

Jay Pil Choi () (Michigan State University)

Additional information is available for the following registered author(s):

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 content 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.

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Publisher Info
Paper provided by NET Institute in its series Working Papers with number 06-04.

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Length: 30 pages
Date of creation: Sep 2006
Date of revision: Sep 2006
Handle: RePEc:net:wpaper:0604

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Paper
- Jay Pil Choi, 2007. "Tying in Two-Sided Markets with Multi-Homing," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]

Find related papers by JEL classification:
L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
L4 - Industrial Organization - - Antitrust Issues and Policies

This paper has been announced in the following NEP Reports:

NEP-ALL-2006-11-12 (All new papers)
NEP-COM-2006-11-12 (Industrial Competition)
NEP-MIC-2006-11-12 (Microeconomics)
NEP-MKT-2006-11-12 (Marketing)
NEP-NET-2006-11-12 (Network Economics)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Carbajo, Jose & de Meza, David & Seidmann, Daniel J, 1990. "A Strategic Motivation for Commodity Bundling," Journal of Industrial Economics, Blackwell Publishing, vol. 38(3), pages 283-98, March. [Downloadable!] (restricted)
Chen, Yongmin, 1997. "Equilibrium Product Bundling," Journal of Business, University of Chicago Press, vol. 70(1), pages 85-103, January. [Downloadable!] (restricted)
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.
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.
Other versions:
- Dennis W. Carlton & Michael Waldman, 1998. "The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries," NBER Working Papers 6831, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Dennis W. Carlton & Michael Waldman, 1998. "The Strategic Use Of Tying To Preserve And Create Market Power In Evolving Industries," University of Chicago - George G. Stigler Center for Study of Economy and State 145, Chicago - Center for Study of Economy and State. [Downloadable!]
Jay Pil Choi, 2004. "Tying and innovation: A dynamic analysis of tying arrangements," Economic Journal, Royal Economic Society, vol. 114(492), pages 83-101, 01. [Downloadable!] (restricted)
Other versions:
- Jay Pil Choi, 1998. "Tying and Innovation: A Dynamic Analysis of Tying Arrangements," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
Julian Wright, 2004. "One-sided Logic in Two-sided Markets," Review of Network Economics, Concept Economics, vol. 3(1), pages 42-63, March. [Downloadable!]
Farrell, Joseph & Klemperer, Paul, 2006. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," CEPR Discussion Papers 5798, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Other versions:
- Joseph Farrell & Paul Klemperer, 2006. "Co-ordination and Lock-in: Competition with Switching Costs and Network Effects," Economics Papers 2006-W07, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
- Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, Elsevier. [Downloadable!] (restricted)
Doganoglu, Toker & Wright, Julian, 2006. "Multihoming and compatibility," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 45-67, January. [Downloadable!] (restricted)
Other versions:
- Toker Doganoglu & Julian Wright, 2003. "Multihoming and compatibility," Departmental Working Papers wp0314, National University of Singapore, Department of Economics. [Downloadable!]
Rochet, Jean-Charles & Tirole, Jean, 2005. "Two-Sided Markets : A Progress Report," IDEI Working Papers 275, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
Other versions:
- Jean-Charles Rochet Author-Email: rochet@cict.fr Author-Workplace-Name: IDEI, University of Toulouse & Jean Tirole Author-Email: tirole@cict.fr Author-Workplace-Name: IDEI, University of Toulouse, 2006. "Two-Sided Markets: A Progress Report," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 645-667, Autumn.
Jay Pil Choi, 1995. "Preemptive R&D, Rent Dissipation and the "Leverage Theory"," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich.
Other versions:
- Choi, Jay Pil, 1996. "Preemptive R&D, Rent Dissipation, and the "Leverage Theory."," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1153-81, November. [Downloadable!] (restricted)
Mark Armstrong Author-Email: mark.armstrong@ucl.ac.uk, 2006. "Competition in Two-Sided Markets," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 668-691, Autumn.
Other versions:
- Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA. [Downloadable!]
Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
Other versions:
- Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group. [Downloadable!] (restricted)
- 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, 06. [Downloadable!] (restricted)
Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-28, Summer.
Juan D. Carrillo & Guofu Tan, 2006. "Platform Competition: The Role of Multi-homing and Complementors," Working Papers 06-30, NET Institute, revised Oct 2006. [Downloadable!]
Amelio, Andrea & Jullien, Bruno, 2007. "Tying and Freebies in Two-Sided Markets," IDEI Working Papers 445, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Nicholas Economides & Joacim Tag, 2007. "Net Neutrality on the Internet: A Two-sided Market Analysis," Working Papers 07-27, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
Other versions:
- Economides , Nicholas & Tåg, Joacim, 2008. "Net Neutrality on the Internet: A Two-sided Market Analysis," Working Paper Series 727, Research Institute of Industrial Economics. [Downloadable!]
- Nicholas Economides & Joacim Tåg, 2007. "Net Neutrality on the Internet: A Two-sided Market Analysis," Working Papers 07-14, NET Institute, revised Sep 2007. [Downloadable!]
- Nicholas Economides & Joacim Tåg, 2007. "Net Neutrality on the Internet: A Two-sided Market Analysis," Working Papers 07-45, NET Institute, revised Nov 2007. [Downloadable!]
Jay Pil Choi & Byung-Cheol Kim, 2008. "Net Neutrality and Investment Incentives," Working Papers 08-03, NET Institute, revised Sep 2008. [Downloadable!]
Other versions:
- Jay Pil Choi & Byung-Cheol Kim, 2008. "Net Neutrality and Investment Incentives," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
Pollock, Rufus, 2005. "The Control of Porting in Two-Sided Markets," MPRA Paper 5023, University Library of Munich, Germany, revised Jun 2007. [Downloadable!]
Other versions:
- Pollock, R., 2007. "The Control of Porting in Two-Sided Markets," Cambridge Working Papers in Economics 0754, Faculty of Economics, University of Cambridge. [Downloadable!]

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