 A Theory of Full-line ForcingM. L. Burstein Chapter 11 in Studies in Banking Theory, Financial History and Vertical Control, 1988, pp 156-192 from Palgrave Macmillan Abstract: Abstract Even casual observation of the business world or the most careless reading of trade-regulation cases reveals that firms with monopoly power with respect to one good frequently attempt to condition the right to purchase that good by requiring that the buyer also purchase stated quantities of ‘requirements’ of other goods from the monopolist. Full-line forcing, defined here as the practice of requiring that the purchaser of product A purchase stated quantities or ‘requirements’ of products B, C, … from the seller of A, is indeed an important economic phenomenon. It is my purpose to state a fairly general theory explaining this phenomenon on grounds independent of those advanced by the courts in pursuance of the decision rule of the Motion Picture Patents case, where a tying arrangement was rejected on the ground that tying the sale of a second product to a patented product involved extension of monopoly into a new market.2 My central theme is that only the most extraordinary circumstances permit a monopolist to extract all of the profit potential of his monopoly from manipulation of the price of the monopolized product; in general, auxiliary mechanisms are necessary if the full possibilities of monopoly profit are to be realized. This theme possesses a corollary of wider, and perhaps more shocking, application: there are few circumstances in which a firm with monopoly power over a good used as an input in some economic process does not have an incentive to vertically integrate that process, and full-line forces can sometimes be seen as means of achieving the effects of vertical integration. Keywords: Marginal Cost; Consumer Surplus; Demand Curve; Vertical Integration; Wholesale Price (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-09978-8_11 Ordering information: This item can be ordered from DOI: 10.1007/978-1-349-09978-8_11 Access Statistics for this chapter More chapters in Palgrave Macmillan Books from Palgrave Macmillan |
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