Why Tie a Product Consumers Do Not Use?
- (pp. 85-105)
Abstract
We provide an explanation for tying not based on any of the standard arguments: efficiency, price discrimination, or exclusion. In our analysis a monopolist ties a complementary good to its monopolized good, but consumers do not use the tied good. The tie is profitable because it shifts profits from a complementary good rival to the monopolist. We show such tying is socially inefficient, but arises only when the tie is socially efficient in the absence of the rival. We relate this form of tying to several examples, discuss how it can also arise under competition, and explore its antitrust implications. (JEL D42, K21, L12, L25, L40)Citation
Carlton, Dennis W., Joshua S. Gans, and Michael Waldman. 2010. "Why Tie a Product Consumers Do Not Use?" American Economic Journal: Microeconomics, 2 (3): 85-105. DOI: 10.1257/mic.2.3.85JEL Classification
- D42 Market Structure and Pricing: Monopoly
- K21 Antitrust Law
- L12 Monopoly; Monopolization Strategies
- L25 Firm Performance: Size, Diversification, and Scope
- L40 Antitrust Issues and Policies: General
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