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Theories of Tying and Implications for Antitrust

33 Pages Posted: 13 Oct 2005  

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

Date Written: July 2005

Abstract

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.

Keywords: Tie in sales

JEL Classification: L00, L12, L4, L40

Suggested Citation

Carlton , Dennis W. and Waldman, Michael, Theories of Tying and Implications for Antitrust (July 2005). Johnson School Research Paper Series No. 24-06. Available at SSRN: https://ssrn.com/abstract=809304 or http://dx.doi.org/10.2139/ssrn.809304

Dennis W. Carlton (Contact Author)

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

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

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

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