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Bundling and Tying

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  • Nicholas Economides

    () (Stern School of Business, New York University. 44 West 4th Street, New York, NY 10012)

Abstract

We discuss strategic ways that sellers can use tying and bundling with requirement conditions to extract consumer surplus. We analyze different types of tying and bundling creating (i) intra-product price discrimination; (ii) intra-consumer price discrimination; and (iii) inter-product price discrimination, and assess the antitrust liability that these practices may entail. We also discuss the impact on consumers and competition, as well as potential antitrust liability of bundling “incontestable” and “contestable” demand for the same good.

Suggested Citation

  • Nicholas Economides, 2014. "Bundling and Tying," Working Papers 14-22, NET Institute.
    • Handle: RePEc:net:wpaper:1422
    as

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    File URL: http://www.stern.nyu.edu/networks/Economides_Bundling_and_Tying.pdf
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    References listed on IDEAS

    as
    1. Schmalensee, Richard, 1984. "Gaussian Demand and Commodity Bundling," The Journal of Business, University of Chicago Press, vol. 57(1), pages 211-230, January.
    2. Abraham L. Wickelgren, 2007. "Bundled Discounts, Leverage Theory, and Downstream Competition," American Law and Economics Review, Oxford University Press, vol. 9(2), pages 370-383.
    3. Bruce Kobayashi, 2005. "The Economics of Loyalty Rebates and Antitrust Law in the United States," CPI Journal, Competition Policy International, vol. 1.
    4. Schmalensee, Richard, 1982. "Commodity Bundling by Single-Product Monopolies," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 67-71, April.
    5. Nicholas Economides, 2009. "Loyalty/Requirement Rebates and the Antitrust Modernization Commission: What is the Appropriate Liability Standard?," Working Papers 09-02, NET Institute, revised Mar 2009.
    6. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    7. Dennis W. Carlton & Patrick Greenlee & Michael Waldman, 2008. "Assessing the Anticompetitive Effects of Multiproduct Pricing," NBER Working Papers 14199, National Bureau of Economic Research, Inc.
    8. Whinston, Michael D, 1990. "Tying, Foreclosure, and Exclusion," American Economic Review, American Economic Association, vol. 80(4), pages 837-859, September.
    9. Jin Li & Niko Matouschek & Michael Powell, 2017. "Power Dynamics in Organizations," American Economic Journal: Microeconomics, American Economic Association, vol. 9(1), pages 217-241, February.
    10. Greenlee, Patrick & Reitman, David & Sibley, David S., 2008. "An antitrust analysis of bundled loyalty discounts," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1132-1152, September.
    11. Barry Nalebuff, 2009. "Price Discrimination and Welfare," CPI Journal, Competition Policy International, vol. 5.
    12. Timothy J. Brennan, 2008. "Bundled Rebates As Exclusion Rather Than Predation," Journal of Competition Law and Economics, Oxford University Press, vol. 4(2), pages 335-374.
    13. Einer R. Elhauge (ed.), 2012. "Research Handbook on the Economics of Antitrust Law," Books, Edward Elgar Publishing, number 13268, July.
    14. David Spector, 2005. "Loyalty Rebates: An Assessment of Competition Concerns and a Proposed Structured Rule of Reason," CPI Journal, Competition Policy International, vol. 1.
    15. Emilio Espino & Julian Kozlowski & Juan M. Sanchez, 2013. "Too big to cheat: Efficiency and Investment in Partnerships," Working Papers 2013-001, Federal Reserve Bank of St. Louis, revised 17 Jul 2015.
    16. Barry Nalebuff, 2004. "Bundling as an Entry Barrier," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 159-187.
    Full references (including those not matched with items on IDEAS)

    More about this item

    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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