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The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries

Posted: 7 May 2002  

Dennis W. Carlton

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Michael Waldman

Cornell University - Samuel Curtis Johnson Graduate School of Management

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Abstract

This article investigates how the tying of complementary products can be used to preserve and create monopoly positions. We first show how a monopolist of a product in the current period can use tying to preserve its monopoly in the future. We then show how a monopolist in one market can employ tying to extend its monopoly into a newly emerging market. Our analysis explains how a dominant firm can use tying to remain dominant in an industry undergoing rapid technological change. The analysis focuses on entry costs and network externalities. We also relate our analysis to the Microsoft case.

Suggested Citation

Carlton , Dennis W. and Waldman, Michael, The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries. RAND Journal of Economics, Vol. 33, No. 2. Available at SSRN: https://ssrn.com/abstract=307723

Dennis W. Carlton

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
312-322-0215 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Michael Waldman (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States
607-255-8631 (Phone)

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