IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

A Leverage Theory of Tying in Two-Sided Markets

Listed author(s):
  • CHOI, Jay Pil
  • JEON, Doh-Shin
Registered author(s):

    Motivated by the recent antitrust investigations concerning Google, we develop a leverage theory of tying in two-sided markets. In a setting where the "one monopoly profit result" holds otherwise, we uncover a new channel through which tying allows a monopolistic firm in one market to credibly leverage its monopoly power to another competing market if the latter is two-sided. In the presence of the nonnegative price constraint, tying provides a mechanism to circumvent the constraint in the tied product market without inviting an aggressive response by the rival firm. We identify conditions under which tying in two-sided markets is promotable and explore its welfare implications. In addition, we show that our model can be applied more widely to any markets in which sales to consumers in one market can generate additional revenues that cannot be competed away due to non-negative price constraints.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/28188/1/070_hiasDP-E-37.pdf
    Download Restriction: no

    Paper provided by Hitotsubashi Institute for Advanced Study, Hitotsubashi University in its series Discussion paper series with number HIAS-E-37.

    as
    in new window

    Length: 55 p.
    Date of creation: Nov 2016
    Handle: RePEc:hit:hiasdp:hias-e-37
    Contact details of provider: Postal:
    Faculty Building II, 2-1, Naka, Kunitachi, 186 - 8601

    Phone: (+81) 42 – 580 - 8604
    Fax: (+81) 42 – 580 - 8605
    Web page: http://hias.ad.hit-u.ac.jp/
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as
    in new window


    1. Amelio, Andrea & Jullien, Bruno, 2012. "Tying and freebies in two-sided markets," International Journal of Industrial Organization, Elsevier, vol. 30(5), pages 436-446.
    2. Hurkens, Sjaak & Jeon, Doh-Shin & Menicucci, Domenico, 2016. "Leveraging Dominance with Credible Bundling," CEPR Discussion Papers 11304, C.E.P.R. Discussion Papers.
    3. Dennis W. Carlton & Michael Waldman, 2002. "The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 194-220, Summer.
    4. Doh-Shin Jeon & Domenico Menicucci, 2012. "Bundling and Competition for Slots," American Economic Review, American Economic Association, vol. 102(5), pages 1957-1985, August.
    5. Doh-Shin Jeon & Domenico Menicucci, 2006. "Bundling Electronic Journals and Competition among Publishers," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 1038-1083, 09.
    6. Joseph Farrell & Nancy T. Gallini, 1988. "Second-Sourcing as a Commitment: Monopoly Incentives to Attract Competition," The Quarterly Journal of Economics, Oxford University Press, vol. 103(4), pages 673-694.
    7. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-841, August.
    8. 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.
    9. Michael Waldman, 1993. "A New Perspective on Planned Obsolescence," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 273-283.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:hit:hiasdp:hias-e-37. 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: (Digital Resources Section, Hitotsubashi University Library)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.