Tying and innovation: A dynamic analysis of tying arrangements

Research output: Contribution to journalArticle

36 Citations (Scopus)

Abstract

This paper analyses the effects of tying arrangements on R and D incentives. It shows that tying is a means through which a firm can commit to more aggressive R and D investment in the tied goods market. Tying also has the strategic effect of reducing rivals' incentives to invest in R and D. The strategy of tying is a profitable one if the gains, via an increased share of dynamic rents in the tied goods market, exceed the losses that result from intensified price competition in the market. The welfare implications of tying, and consequently the appropriate antitrust policy, are discussed.

Original languageEnglish
Pages (from-to)83-101
Number of pages19
JournalEconomic Journal
Volume114
Issue number492
DOIs
Publication statusPublished - 2004 Jan

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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