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Identifier to cite or link to this item: https://hdl.handle.net/10086/28188

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Title
A Leverage Theory of Tying in Two-Sided Markets
Creator
Creator Name
CHOI, Jay Pil CHOI, Jay Pil
Affiliation
Affiliation Name
Michigan State University
Affiliation
Affiliation Name
Hitotsubashi University
Creator Name
JEON, Doh-Shin JEON, Doh-Shin
Affiliation
Affiliation Name
University of Toulouse Capitole (IDEI)
Affiliation
Affiliation Name
CEPR
Editor
Contributor Name
Hitotsubashi Institute for Advanced Study, Hitotsubashi University
Key Word
Tying
Leverage of monopoly power
Two-sided markets
Zero pricing,
Non-negative pricing constraint
JEL
D4
L1
L5
Abstract
Motivated by the recent antitrust investigations concerning Google, we develop a leverage theory of tying in two-sided markets. In a setting where the "one monopoly profit result" holds otherwise, we uncover a new channel through which tying allows a monopolistic firm in one market to credibly leverage its monopoly power to another competing market if the latter is two-sided. In the presence of the nonnegative price constraint, tying provides a mechanism to circumvent the constraint in the tied product market without inviting an aggressive response by the rival firm. We identify conditions under which tying in two-sided markets is promotable and explore its welfare implications. In addition, we show that our model can be applied more widely 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.
Publisher
Hitotsubashi Institute for Advanced Study, Hitotsubashi University
Issued Date
2016-11
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
Discussion paper series ; No. HIAS-E-37
Number of Pages
55
Appears in Collections
Discussion paper series / Hitotsubashi Institute for Advanced Study, Hitotsubashi University
URL
https://hdl.handle.net/10086/28188