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On Holders, Blades and Other Tie-In Sales

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  • Alain Egli
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    Abstract

    Tie-in sales have a bad image because of anti-competitive effects. Notably, tying contracts allow monopolists to carry over monopoly power into markets where they meet competition. Most of the literature assumes a firm being monopolist in one market and facing competition in another. In contrast, we analyze two firms which both are monopolists in one market and competitors in the other. Under such a symmetric structure tying has competitive effects. Tie-in sales may increase the consumers' expected utility. By tying their products, the firms insure consumers against uncertain future demand

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    File URL: http://www.vwl.unibe.ch/papers/dp/dp0417.pdf
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    Bibliographic Info

    Paper provided by Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number dp0417.

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    Date of creation: Jul 2004
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    Handle: RePEc:ube:dpvwib:dp0417

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    Related research

    Keywords: Tie-in sales; leverage theory of tying; competition; expected utility;

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    1. 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 283-98, March.
    2. Liebowitz, S J, 1983. "Tie-In Sales and Price Discrimination," Economic Inquiry, Western Economic Association International, vol. 21(3), pages 387-99, July.
    3. Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 475-98, August.
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