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On Holders, Blades and Other Tie-In Sales

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  • Alain Egli

Abstract

Tie-in sales have a bad image because of anti-competitive effects. Notably, tying contracts allow monopolists to carry over monopoly power into markets where they meet competition. Most of the literature assumes a firm being monopolist in one market and facing competition in another. In contrast, we analyze two firms which both are monopolists in one market and competitors in the other. Under such a symmetric structure tying has competitive effects. Tie-in sales may increase the consumers' expected utility. By tying their products, the firms insure consumers against uncertain future demand

Suggested Citation

  • Alain Egli, 2004. "On Holders, Blades and Other Tie-In Sales," Diskussionsschriften dp0417, Universitaet Bern, Departement Volkswirtschaft.
  • Handle: RePEc:ube:dpvwib:dp0417
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    File URL: http://www.vwl.unibe.ch/wp-content/uploads/papers/dp/dp0417.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Liebowitz, S J, 1983. "Tie-In Sales and Price Discrimination," Economic Inquiry, Western Economic Association International, vol. 21(3), pages 387-399, July.
    3. Ulrich Kamecke, 1998. "Tying Contracts and Asymmetric Information," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 154(3), pages 531-531, September.
    4. William James Adams & Janet L. Yellen, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 90(3), pages 475-498.
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    More about this item

    Keywords

    Tie-in sales; leverage theory of tying; competition; expected utility;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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