Tying in Two-Sided Markets with Below-Cost or Negative Pricing

Jong-Hee Hahn and So Hye Yoon
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So Hye Yoon: Yonsei Univ

No 2020rwp-177, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: We show that tying can be profitable in two-sided markets even if below-cost or negative pricing is allowed. With the coexistence of two consumer groups (one treating tying and tied goods as perfect complements and the other as independent products), a tying-good monopolist may face difficulties in extracting rent and wish to use tying to directly capture the large advertising revenue created in the comple- mentary segment. Such tying normally reduces consumer surplus and total welfare. Our theory of tying can be applied to the practice of self-preferencing or requiring pre-installation as in the Google Android and Shopping cases.

Keywords: Tying; Bundling; Leverage theory; Two-sided markets; Negative prices; Platform envelopment; Self-preferencing; Raising rivals' Â’costs (search for similar items in EconPapers)
JEL-codes: D4 L1 L4 (search for similar items in EconPapers)
Pages: 50pages
Date: 2020-08
New Economics Papers: this item is included in nep-com, nep-mic and nep-pay
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