We identify two issues in Choi's  paper on tying in two-sided markets published in this Journal, and provide solutions to both of them. First, we point out that the equilibrium in the absence of tying requires more restrictive conditions and does not satisfy a natural equilibrium refinement criterion. We offer an alternative timing structure that validates the equilibrium derived in Choi  under the conditions provided there. Second, we show that his equilibrium analysis with tying ignores a profitable deviation. We rectify this analysis under our alternative timing structure and derive the (mixed-strategy) equilibrium with tying. We also show by means of simulations that tying is welfare-enhancing whenever it is profitable, which is consistent with the main finding in Choi .
Bibliographical noteFunding Information:
∗We are grateful to the Editor and two referees for very helpful comments and suggestions. The financial support of the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme (grant agreement No. 670494) and the National Research Foundation of Korea Grant funded by the Korean Government (NRF-2016S1A5A2A01022389) is gratefully† acknowledged.
All Science Journal Classification (ASJC) codes
- Business, Management and Accounting(all)
- Economics and Econometrics