Tying in two-sided markets with multi-homing

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Abstract

This paper analyzes the effects of tying on market competition and social welfare in two-sided markets when economic agents can engage in multi-homing by participating in multiple platforms to reap maximal network benefits. The model shows that tying induces more consumers to multi-home and makes platform-specific exclusive content available to more consumers, which is beneficial to content providers. As a result, tying can be welfare-enhancing if multi-homing is allowed, even in cases where its welfare impacts are negative in the absence of multi-homing. The analysis thus can have important implications for recent antitrust cases in industries where multi-homing is prevalent.

Original languageEnglish
Pages (from-to)607-626
Number of pages20
JournalJournal of Industrial Economics
Volume58
Issue number3
DOIs
Publication statusPublished - 2010 Sep 1

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All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting(all)
  • Economics and Econometrics

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