Tying

Abstract

This chapter first reviews economic theories for why firms tie their products and then discusses our views concerning what this review implies concerning optimal antitrust policy for tying cases. The review considers efficiency rationales for tying, price discrimination rationales, and various exclusionary rationales that have recently been put forth. The chapter specifically discusses the Chicago School view that tying should raise no antitrust concern and explains when that logic breaks down. In our discussion of optimal antitrust policy concerning tying, ourmain point is that, because of the prevalence of efficiency-driven tying in real world markets and the difficulty that courts have in reliably identifying all the welfare consequences of a tie, in general there should be a high hurdle required for intervention in tying cases.