Tying as a Response to Demand Uncertainty

RAND JOURNAL OF ECONOMICS, Vol 28 No 3

Posted: 24 Sep 1997

See all articles by Frank Mathewson

Frank Mathewson

University of Toronto

Ralph A. Winter

University of British Columbia (UBC) - Division of Finance

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

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

G. Frank Mathewson

University of Toronto ( email )

140 St. George Street
Toronto, Ontario M5S 3G6
Canada

Ralph A. Winter (Contact Author)

University of British Columbia (UBC) - Division of Finance ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8339 (Phone)
604-822-8377 (Fax)

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