IDEAS home Printed from https://ideas.repec.org/a/ecj/econjl/v114y2004i492p83-101.html
   My bibliography  Save this article

Tying and innovation: A dynamic analysis of tying arrangements

Author

Listed:
  • Jay Pil Choi

Abstract

This paper analyses the effects of tying arrangements on R&D incentives. It shows that tying is a means through which a firm can commit to more aggressive R&D investment in the tied goods market. Tying also has the strategic effect of reducing rivals' incentives to invest in R&D. The strategy of tying is a profitable one if the gains, via an increased share of dynamic rents in the tied goods market, exceed the losses that result from intensified price competition in the market. The welfare implications of tying, and consequently the appropriate antitrust policy, are discussed. Copyright 2004 Royal Economic Society.

Suggested Citation

  • Jay Pil Choi, 2004. "Tying and innovation: A dynamic analysis of tying arrangements," Economic Journal, Royal Economic Society, vol. 114(492), pages 83-101, January.
  • Handle: RePEc:ecj:econjl:v:114:y:2004:i:492:p:83-101
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=ecoj&volume=114&issue=492&year=2004&part=null
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Farrell, Joseph & Saloner, Garth, 1986. "Installed Base and Compatibility: Innovation, Product Preannouncements, and Predation," American Economic Review, American Economic Association, vol. 76(5), pages 940-955, December.
    2. Jay Pil Choi, 1996. "Preemptive R&D, Rent Dissipation, and the "Leverage Theory"," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1153-1181.
    3. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    4. R. Preston McAfee & John McMillan & Michael D. Whinston, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 371-383.
    5. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    6. 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 283-298, March.
    7. William James Adams & Janet L. Yellen, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 90(3), pages 475-498.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alessandro Avenali & Anna D’Annunzio & Pierfrancesco Reverberi, 2013. "Bundling, Competition and Quality Investment: A Welfare Analysis," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(3), pages 221-241, November.
    2. Sang Kim & Dong-Ju Kim, 2005. "One-phone service and mobile market foreclosure," Netnomics, Springer, vol. 7(1), pages 59-68, April.
    3. Rey, Patrick & Tirole, Jean, 2007. "A Primer on Foreclosure," Handbook of Industrial Organization, Elsevier.
    4. Jay Pil Choi, 2008. "MERGERS WITH BUNDLING IN COMPLEMENTARY MARKETS -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 553-577, September.
    5. Heinrich, Torsten, 2015. "A Replicator Dynamic and Simulation Analysis of Network Externalities and Compatibility Among Standards," MPRA Paper 67198, University Library of Munich, Germany.
    6. Lybecker Kristina M. & Lemke Robert J., 2007. "Extending Monopoly Power under Joint Production: A Case Study of the Red Cross and the Blood Centers of America," Journal of Industrial Organization Education, De Gruyter, vol. 2(1), pages 1-23, October.
    7. Heinrich, Torsten, 2015. "Growth Cycles, Network Effects, and Intersectoral Dependence: An Agent-Based Model and Simulation Analysis," MPRA Paper 79575, University Library of Munich, Germany, revised 08 Jun 2017.
    8. Heinrich, Torsten, 2014. "Standard wars, tied standards, and network externality induced path dependence in the ICT sector," Technological Forecasting and Social Change, Elsevier, vol. 81(C), pages 309-320.
    9. Andrea Mantovani, 2013. "The Strategic Effect of Bundling: A New Perspective," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(1), pages 25-43, February.
    10. Hans-Werner Sinn, 1999. "Inflation and Welfare: Comment on Robert Lucas," NBER Working Papers 6979, National Bureau of Economic Research, Inc.
    11. Chun-Hui Miao, 2010. "TYING, COMPATIBILITY AND PLANNED OBSOLESCENCE -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 58(3), pages 579-606, September.
    12. Chung, Hui-Ling & Chen, Hung-Yi & Hu, Jin-Li & Lin, Yan-Shu, 2014. "Bundling With Quality Choice," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 55(2), pages 147-165, December.
    13. Oliver Budzinski & Katharina Wacker, 2007. "The Prohibition Of The Proposed Springer-Prosiebensat.1 Merger: How Much Economics In German Merger Control?," Journal of Competition Law and Economics, Oxford University Press, vol. 3(2), pages 281-306.
    14. Jeffrey Prince & Shane Greenstein, 2014. "Does Service Bundling Reduce Churn?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(4), pages 839-875, December.
    15. Hui-Ling Chung & Yan-Shu Lin & Jin-Li Hu, 2013. "Bundling strategy and product differentiation," Journal of Economics, Springer, vol. 108(3), pages 207-229, April.
    16. Jay Pil Choi, 2010. "TYING IN TWO-SIDED MARKETS WITH MULTI-HOMING -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 58(3), pages 607-626, September.
    17. SHIM, Sunghee & OH, Jungsuk, 2006. "Service Bundling and the Role of Access Charge in the Broadband Internet Service Market," MPRA Paper 3553, University Library of Munich, Germany.
    18. Dennis W. Carlton & Michael Waldman, 2005. "Tying, Upgrades, and Switching Costs in Durable-Goods Markets," NBER Working Papers 11407, National Bureau of Economic Research, Inc.
    19. Peitz, Martin, 2008. "Bundling may blockade entry," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 41-58, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecj:econjl:v:114:y:2004:i:492:p:83-101. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/resssea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.