A Leverage Theory of Tying in Two-Sided Markets

Doh-Shin Jeon and Jay Choi

No 11484, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Tying; Leverage of monopoly power; Two-sided markets; Zero pricing; Non-negative pricing constraint (search for similar items in EconPapers)
JEL-codes: D4 L1 L5 (search for similar items in EconPapers)
Date: 2016-09
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://cepr.org/publications/DP11484 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: A Leverage Theory of Tying in Two-Sided Markets (2016)
Working Paper: A Leverage Theory of Tying in Two-Sided Markets (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:11484

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP11484
orders@cepr.org

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by (repec@cepr.org).