Tying and freebies in two-sided markets

Andrea Amelio and Bruno Jullien

International Journal of Industrial Organization, 2012, vol. 30, issue 5, 436-446

Abstract: In two-sided markets where platforms are constrained to set non-negative prices, tying can be deployed by platforms as a tool to introduce implicit subsidies. For a monopoly, this raises participation and benefits consumers on both sides. In a duopoly, tying on one side makes a platform more or less competitive on the other side depending on externalities. Tying may not be ex-ante optimal while the competing platform may benefit from it. The impact on consumers' surplus depends on whether competition is softened or intensified on the profitable side. Moreover tying increases total welfare if network effects are strong.

Keywords: Tying; Two-sided market; Platform competition (search for similar items in EconPapers)
JEL-codes: D43 L11 L13 L42 L81 L86 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (40)

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Related works:
Working Paper: Tying and Freebies in Two-Sided Markets (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:30:y:2012:i:5:p:436-446

DOI: 10.1016/j.ijindorg.2012.03.002

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