Tying, Bundling, and Loyalty/Requirement Rebates
AbstractI discuss the impact of tying, bundling, and loyalty/requirement rebates on consumer surplus in the affected markets. I show that the Chicago School Theory of a single monopoly surplus that justifies tying, bundling, and loyalty/requirement rebates on the basis of efficiency typically fails. Thus, tying, bundling, and loyalty/requirement rebates can be used to extract consumer surplus and enhance profit of firms with market power. I discuss the various setups when this occurs.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 10-26.
Length: 38 pages
Date of creation: Dec 2010
Date of revision:
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Web page: http://www.NETinst.org/
tying; ties; bundling; bundled rebates; loyalty discounts; loyalty requirement rebates; single monopoly surplus; monopolization; market power; foreclosure; antitrust;
Other versions of this item:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-03 (All new papers)
- NEP-COM-2011-01-03 (Industrial Competition)
- NEP-IND-2011-01-03 (Industrial Organization)
- NEP-MKT-2011-01-03 (Marketing)
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