Tying and freebies in two-sided markets

B-Tier
Journal: International Journal of Industrial Organization
Year: 2012
Volume: 30
Issue: 5
Pages: 436-446

Authors (2)

Score contribution per author:

1.005 = (α=2.01 / 2 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

In two-sided markets where platforms are constrained to set non-negative prices, tying can be deployed by platforms as a tool to introduce implicit subsidies. For a monopoly, this raises participation and benefits consumers on both sides. In a duopoly, tying on one side makes a platform more or less competitive on the other side depending on externalities. Tying may not be ex-ante optimal while the competing platform may benefit from it. The impact on consumers' surplus depends on whether competition is softened or intensified on the profitable side. Moreover tying increases total welfare if network effects are strong.

Technical Details

RePEc Handle
repec:eee:indorg:v:30:y:2012:i:5:p:436-446
Journal Field
Industrial Organization
Author Count
2
Added to Database
2026-01-25