On Holders, Blades and Other Tie-In Sales
AbstractTie-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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Date of creation: Jul 2004
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Tie-in sales; leverage theory of tying; competition; expected utility;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-12-12 (All new papers)
- NEP-COM-2004-12-12 (Industrial Competition)
- NEP-MIC-2004-12-12 (Microeconomics)
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, Wiley Blackwell, vol. 38(3), pages 283-98, March.
- Liebowitz, S J, 1983. "Tie-In Sales and Price Discrimination," Economic Inquiry, Western Economic Association International, vol. 21(3), pages 387-99, July.
- 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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