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Upstream bundling and leverage of market power

Author

Listed:
  • Alexandre De Cornière

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Greg Taylor

Abstract

We present a novel rationale for bundling in vertical relations. In many markets, upstream firms compete to be in the best downstream slots (e.g., the best shelf in a retail store or the default application on a platform). If a multi-product upstream firm faces competition for a subset of its products, we show that tying the monopolised product with the competitive ones can reduce upstream rivals' willingness to offer slotting fees to retailers. This strategy does not rely on entry deterrence and can be achieved through contractual or even virtual tying. The model is particularly relevant to the Google-Android case.

Suggested Citation

  • Alexandre De Cornière & Greg Taylor, 2021. "Upstream bundling and leverage of market power," Post-Print hal-03524443, HAL.
    • Handle: RePEc:hal:journl:hal-03524443
    DOI: 10.1093/ej/ueab024
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    Cited by:

    1. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    2. Argentesi, Elena & Buccirossi, Paolo & Calvano, Emilio & Duso, Tomaso & Marrazzo, Alessia & Nava, Salvatore, 2021. "Merger Policy in Digital Markets: An Ex Post Assessment," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 17(1), pages 95-140.
    3. Jullien, Bruno & Sand-Zantman, Wilfried, 2021. "The Economics of Platforms: A Theory Guide for Competition Policy," Information Economics and Policy, Elsevier, vol. 54(C).
    4. Sitong Pan & Qinghua Shi & Yue Zhang, 2025. "Platform economy and missing entrepreneurship: Evidence from E‐commerce development policy in China," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 33(2), pages 209-251, April.
    5. Jong-Hee Hahn & So Hye Yoon, 2020. "Tying in Two-Sided Markets with Below-Cost or Negative Pricing," Working papers 2020rwp-177, Yonsei University, Yonsei Economics Research Institute.
    6. Jong‐Hee Hahn & Sang‐Hyun Kim & So Hye Yoon, 2023. "Tying in two‐sided markets with heterogeneous advertising revenues and negative pricing," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 32(4), pages 757-787, October.
    7. Rossitza Kotzeva & David Kovo & Szabolcs Lorincz & Geza Sapi & Lluis Sauri & Tommaso Valletti, 2019. "Recent Developments at DG Competition: 2018/2019," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(4), pages 551-578, December.
    8. Chiara Fumagalli & Massimo Motta, 2024. "Economic Principles for the Enforcement of Abuse of Dominance Provisions," Working Papers 1431, Barcelona School of Economics.
    9. Wipusanawan, Chayanin, 2023. "Standard-essential patents, innovation, and competition," Other publications TiSEM 292e319a-9e6a-4465-8f8f-7, Tilburg University, School of Economics and Management.
    10. Afilipoaie, Adelaida & Donders, Karen & Ballon, Pieter, 2022. "The European Commission's approach to mergers involving software-based platforms: Towards a better understanding of platform power," Telecommunications Policy, Elsevier, vol. 46(5).
    11. Steffen, Nico & Wiewiorra, Lukas & Kroon, Peter, 2021. "Wettbewerb und Regulierung in der Plattform- und Datenökonomie," WIK Discussion Papers 481, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    12. Jorge Padilla & Joe Perkins & Salvatore Piccolo, 2022. "Self‐Preferencing in Markets with Vertically Integrated Gatekeeper Platforms," Journal of Industrial Economics, Wiley Blackwell, vol. 70(2), pages 371-395, June.
    13. Chambolle, Claire & Christin, Clémence & Molina, Hugo, 2023. "Buyer power and exclusion: A progress report," International Journal of Industrial Organization, Elsevier, vol. 90(C).

    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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