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Tying, Bundling, and Loyalty/Requirement Rebates


  • Nicholas Economides


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.
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Suggested Citation

  • Nicholas Economides, 2011. "Tying, Bundling, and Loyalty/Requirement Rebates," Working Papers 11-01, New York University, Leonard N. Stern School of Business, Department of Economics.
  • Handle: RePEc:ste:nystbu:11-01

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    References listed on IDEAS

    1. Stephen G. Cecchetti & Piti Disyatat, 2010. "Central bank tools and liquidity shortages," Economic Policy Review, Federal Reserve Bank of New York, issue Aug, pages 29-42.
    2. Sushil Wadhwani, 2008. "Should Monetary Policy respond to Asset Price Bubbles? Revisiting the Debate," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
    3. Bank for International Settlements, 2010. "Macroprudential instruments and frameworks: a stocktaking of issues and experiences," CGFS Papers, Bank for International Settlements, number 38.
    4. Alan S. Blinder, 2010. "How Central Should the Central Bank Be?," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 123-133, March.
    5. Sushil Wadhwani, 2008. "Should Monetary Policy Respond To Asset Price Bubbles? Revisiting the Debate," National Institute Economic Review, National Institute of Economic and Social Research, vol. 206(1), pages 25-34, October.
    6. repec:pri:cepsud:198blinder is not listed on IDEAS
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    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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