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Tying, Bundling, and Loyalty/Requirement Rebates

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Abstract

I discuss the impact of tying, bundling, and loyalty/requirement rebates on consumer surplus in the affected markets. I show that the Chicago School Theory of a single monopoly surplus that justifies tying, bundling, and loyalty/requirement rebates on the basis of efficiency typically fails. Thus, tying, bundling, and loyalty/requirement rebates can be used to extract consumer surplus and enhance profit of firms with market power. I discuss the various setups when this occurs.

Suggested Citation

  • Nicholas Economides, 2010. "Tying, Bundling, and Loyalty/Requirement Rebates," Working Papers 10-26, NET Institute.
  • Handle: RePEc:net:wpaper:1026
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    File URL: http://www.stern.nyu.edu/networks/Economides_Tying_Bundling_and_Loyalty_Requirement_Rebates.pdf
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    1. repec:eee:ijrema:v:34:y:2017:i:4:p:813-828 is not listed on IDEAS

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    Keywords

    tying; ties; bundling; bundled rebates; loyalty discounts; loyalty requirement rebates; single monopoly surplus; monopolization; market power; foreclosure; antitrust;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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