Tying as a Response to Demand Uncertainty

Frank Mathewson and Ralph A. Winter ()

RAND Journal of Economics, 1997, vol. 28, issue 3, pages 566-583

Abstract: This article examines requirements tying of a competitively supplied good to a monopolized good. It expands the set of market conditions in which this instrument is known to be profitable. With heterogeneous, privately informed buyers, a firm can profit by tying two goods even when demands for the goods are price independent - providing the demands are stochastically dependent. We investigate the profitability of tying as a response to stochastic demand, as well as the effects of tying on prices and the extent of the market served.

Date: 1997
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