Tying as a Response to Demand Uncertainty
RAND JOURNAL OF ECONOMICS, Vol 28 No 3
Posted: 24 Sep 1997
Abstract
This article examines requirements tying of a competitively supplied good to a monopolized good. It expands the set of market conditions in which this instrument is known to be profitable. With heterogeneous, privately informed buyers, a firm can profit by tying two goods even when demands for the goods are price independent - providing the demands are stochastically dependent. We investigate the profitability of tying as a response to stochastic demand, as well as the effects of tying on prices and the extent of the market served.
JEL Classification: D21
Suggested Citation: Suggested Citation
Mathewson, G. Frank and Winter, Ralph A., Tying as a Response to Demand Uncertainty. RAND JOURNAL OF ECONOMICS, Vol 28 No 3, Available at SSRN: https://ssrn.com/abstract=10796
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