A Leverage Theory of Tying in Two-Sided Markets

Jay Choi and Doh-Shin Jeon

No 6073, CESifo Working Paper Series from CESifo

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: D40 L10 L50 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: A Leverage Theory of Tying in Two-Sided Markets (2019)
Working Paper: A Leverage Theory of Tying in Two-Sided Markets (2016)
Working Paper: A Leverage Theory of Tying in Two-Sided Markets (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6073

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