Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/147327
Authors: 
Choi, Jay Pil
Jeon, Doh-Shin
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 6073
Abstract: 
Partly motivated by the recent antitrust investigations concerning Google, we develop a leverage theory of tying in two-sided markets. We analyze incentives for a monopolist to tie its monopolized product with another product in a two-sided market. Tying provides a mechanism to circumvent the non-negative price constraint in the tied product market without inviting an aggressive response as the rival firm faces the non-negative price constraint. We identify conditions under which tying in two-sided markets is profitable and explore its welfare implications. Our mechanism can be more widely applied to any markets in which sales to consumers in one market can generate additional revenues that cannot be competed away due to non-negative price constraints.
Subjects: 
tying
leverage of monopoly power
two-sided markets
zero pricing
non-negative pricing constraint
JEL: 
D40
L10
L50
Document Type: 
Working Paper

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