Tying in Two-Sided Markets with Multi-Homing
|Authors:||Choi, Jay Pil - Michigan State University|
|Keywords:||tying, two-sided markets, (indirect) network effects, multi-homing|
|Series/Report no.:||NET Institute Working Paper;06-04|
|Abstract:||This paper analyzes the effects of tying arrangements on market competition and social welfare in two-sided markets when economic agents can engage in multi-homing, that is, they can participate in multiple platforms in order 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 also 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.|
|Appears in Collections:||NET Institute Working Papers Series|
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