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Tying and Freebies in Two-Sided Markets

Author

Listed:
  • Amelio, Andrea
  • Jullien, Bruno

Abstract

In two-sided markets where platforms are constrained to set non-negative prices, tying can be deployed by platforms as a tool to introduce implicit subsidies. For a monopoly, this raises participation and benefits consumers on both sides. In a duopoly, tying on one side makes a platform more or less competitive on the other side depending on externalities. Tying may not be ex-ante optimal while the competing platform may benefit from it. The impact on consumers' surplus depends on whether competition is softened or intensified on the profitable side. Moreover tying increases total welfare if network effects are strong.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Amelio, Andrea & Jullien, Bruno, 2007. "Tying and Freebies in Two-Sided Markets," IDEI Working Papers 445, Institut d'Économie Industrielle (IDEI), Toulouse.
    • Handle: RePEc:ide:wpaper:6750
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    References listed on IDEAS

    as
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    10. Jay Pil Choi, 2004. "Antitrust Analysis of Tying Arrangements," CESifo Working Paper Series 1336, CESifo.
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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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