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The Leverage Theory of Tying Revisited: Evidence from Newspaper Advertising

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  • Margaret E. Slade

Abstract

Data from the Canadian newspaper-advertising industry is used to assess the private profitability of tying in a market where the standard efficiency motives (e.g., price discrimination, cost saving, and quality control) are unlikely to apply. The empirical assessment is based on a model of leveraging in which suppliers of the tied good are paid a commission rather than a fee for service. This model demonstrates that tying is profitable under a wide range of circumstances. Furthermore, it is found that, with newspapers, tying and monopoly power go hand in hand.

Suggested Citation

  • Margaret E. Slade, 1998. "The Leverage Theory of Tying Revisited: Evidence from Newspaper Advertising," Southern Economic Journal, Southern Economic Association, vol. 65(2), pages 204-222, October.
  • Handle: RePEc:sej:ancoec:v:65:2:y:1998:p:204-222
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    Cited by:

    1. Martin, Stephen, 1999. "Strategic and welfare implications of bundling," Economics Letters, Elsevier, vol. 62(3), pages 371-376, March.
    2. Thibaud Vergé, 2001. "Multiproduct Monopolist and Full-line Forcing: The Efficiency Argument Revisited," Economics Bulletin, AccessEcon, vol. 12(4), pages 1-9.
    3. Thibaud Verge, 2002. "Portfolio Analysis in European Merger Control: An Economic Analysis," The Centre for Market and Public Organisation 02/046, Department of Economics, University of Bristol, UK.
    4. Thibaud Vergé, 2003. "Portfolio Effects and Merger Control: Full-line Forcing as an Entry Deterrence Strategy," Industrial Organization 0301010, EconWPA.
    5. Marcel Goi'{c} & Kinshuk Jerath & Kannan Srinivasan, 2011. "Cross-Market Discounts," Marketing Science, INFORMS, vol. 30(1), pages 134-148, 01-02.

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