Tying, Bundling, and Loyalty/Requirement Rebates

RESEARCH HANDBOOK ON THE ECONOMICS OF ANTITRUST LAW, Einer Elhauge, ed.,Edward Elgar Publishing, Forthcoming

NET Institute Working Paper No. #10-26

NYU Law and Economics Research Paper No. 11-02

40 Pages Posted: 25 Dec 2010 Last revised: 16 May 2011

Nicholas Economides

New York University - Leonard N. Stern School of Business - Department of Economics

Date Written: February 2011

Abstract

I discuss the impact of tying, bundling, and loyalty/requirement rebates on consumer surplus in the affected markets. I show that the Chicago School Theory of a single monopoly surplus that justifies tying, bundling, and loyalty/requirement rebates on the basis of efficiency typically fails. Thus, tying, bundling, and loyalty/requirement rebates can be used to extract consumer surplus and enhance profit of firms with market power. I discuss the various setups when this occurs.

Keywords: tying, ties, bundling, bundled rebates, loyalty discounts, loyalty requirement rebates, single monopoly surplus, monopolization, market power, foreclosure, antitrust

JEL Classification: C72, D42, D43, K21, L12, L40, L41, L42

Suggested Citation

Economides, Nicholas, Tying, Bundling, and Loyalty/Requirement Rebates (February 2011). RESEARCH HANDBOOK ON THE ECONOMICS OF ANTITRUST LAW, Einer Elhauge, ed.,Edward Elgar Publishing, Forthcoming; NET Institute Working Paper No. #10-26; NYU Law and Economics Research Paper No. 11-02. Available at SSRN: https://ssrn.com/abstract=1730354 or http://dx.doi.org/10.2139/ssrn.1730354

Nicholas Economides (Contact Author)

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

44 West 4th Street
New York, NY 10012
United States
212-998-0864 (Phone)
212-995-4218 (Fax)

HOME PAGE: http://www.stern.nyu.edu/networks/

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