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Tying with Network Effects

Author

Listed:
  • Doh-Shin Jeon

    (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)

  • Jay Pil Choi

    (Unknown)

  • Michael Dennis Whinston

    (Unknown)

Abstract

We develop a leverage theory of tying in markets with network effects. When a monopolist in one market cannot perfectly extract surplus from consumers, tying can be a mechanism through which unexploited consumer surplus is used as a demand-side leverage to create a "quasi-installed base" advantage in another market characterized by network effects. Our mechanism does not require any precommitment to tying; rather, tying emerges as a best response that lowers the quality of tied-market rivals. While tying can lead to exclusion of tied-market rivals, it can also expand use of the tying product, leading to ambiguous welfare effects.

Suggested Citation

  • Doh-Shin Jeon & Jay Pil Choi & Michael Dennis Whinston, 2026. "Tying with Network Effects," Post-Print hal-05467973, HAL.
    • Handle: RePEc:hal:journl:hal-05467973
    DOI: 10.1257/aer.20240461
    as

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