Tying to Foreclose in Two-Sided Markets

Shim Sunghee () and Kwak Juwon ()
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Shim Sunghee: Korea Energy Economics Institute, Uiwang-si, Gyeonggi-do, Republic of Korea
Kwak Juwon: School of Economics and Trade, Kyungpook National University, Daegu, Republic of Korea

The B.E. Journal of Economic Analysis & Policy, 2015, vol. 15, issue 4, 1919-1937

Abstract: This paper analyzes the effect of tied-in sales by an essential goods monopolist in a two-sided market. In a two-sided market, the essential goods monopolist may tie a good essential for users, such as an operating system, with a platform, such as a media player, in the user side of the market, to extract profits not from the user side, but from the developer side of the market. From this simple idea, we build a simple two-sided market model and show how the essential goods monopolist may tie a platform with the essential goods on the user side of the market to foreclose a rival firm from the developer side of the market. We also analyze various welfare impacts of tying and discuss the antitrust implications.

Keywords: two-sided market; tying; foreclosure (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1515/bejeap-2014-0116

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