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Tying to Foreclose in Two-Sided Markets

Author

Listed:
  • Shim Sunghee

    (Korea Energy Economics Institute, Uiwang-si, Gyeonggi-do, Republic of Korea)

  • Kwak Juwon

    (School of Economics and Trade, Kyungpook National University, Daegu, Republic of Korea)

Abstract

This paper analyzes the effect of tied-in sales by an essential goods monopolist in a two-sided market. In a two-sided market, the essential goods monopolist may tie a good essential for users, such as an operating system, with a platform, such as a media player, in the user side of the market, to extract profits not from the user side, but from the developer side of the market. From this simple idea, we build a simple two-sided market model and show how the essential goods monopolist may tie a platform with the essential goods on the user side of the market to foreclose a rival firm from the developer side of the market. We also analyze various welfare impacts of tying and discuss the antitrust implications.

Suggested Citation

  • Shim Sunghee & Kwak Juwon, 2015. "Tying to Foreclose in Two-Sided Markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(4), pages 1919-1937, October.
    • Handle: RePEc:bpj:bejeap:v:15:y:2015:i:4:p:1919-1937:n:12
    DOI: 10.1515/bejeap-2014-0116
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    References listed on IDEAS

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    1. Christiaan Hogendorn & Stephen Ka Yat Yuen, 2009. "Platform Competition With ‘Must‐Have’ Components," Journal of Industrial Economics, Wiley Blackwell, vol. 57(2), pages 294-318, June.
    2. 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.
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