A Leverage Theory of Tying in Two-Sided Markets

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 6073

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: General ; Market Structure, Firm Strategy, and Market Performance: General ; Regulation and Industrial Policy: General
• Subject: tying ; leverage of monopoly power ; two-sided markets ; zero pricing ; non-negative pricing constraint

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Choi, Jay Pil ; Jeon, Doh-Shin
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/147327
• Last update: 10.03.2025, 11:45 AM CET