The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries
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
NBER Working Paper No. w6831
This paper investigates how the tying of complementary products can be used to preserve and extend monopoly positions. We first show how a firm that is a monopolist of a product in the current period can use tying to preserve its monopoly position in future periods. We then show using related arguments how a monopolist in one market can employ tying to extend its monopoly position into a newly emerging market. The analysis focuses on the importance of entry costs and network externalities. The paper includes a discussion of antitrust implications.
Number of Pages in PDF File: 66
Date posted: January 25, 1999