Theories of Tying and Implications for Antitrust
Dennis W. Carlton
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)
Cornell University - Samuel Curtis Johnson Graduate School of Management
Johnson School Research Paper Series No. 24-06
This paper 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. We specifically discuss the Chicago School view that tying should raise no antitrust concern and explain when that logic breaks down. In our discussion of optimal antitrust policy concerning tying our main 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.
Number of Pages in PDF File: 33
Keywords: Tie in sales
JEL Classification: L00, L12, L4, L40
Date posted: October 13, 2005
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