TY  - JOUR
AU  - Carlton,Dennis W.
AU  - Gans,Joshua S.
AU  - Waldman,Michael
TI  - Why Tie A Product Consumers Do Not Use?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13339
PY  - 2007
Y2  - August 2007
UR  - http://www.nber.org/papers/w13339
L1  - http://www.nber.org/papers/w13339.pdf
N1  - Author contact info:
Dennis W. Carlton
Booth School of Business
University of Chicago
5807 S. Woodlawn Ave.
Chicago, IL 60637
Tel: 847/217-6000
Fax: 312/322-0262
E-Mail: dennis.carlton@chicagobooth.edu

Joshua Gans
University of Toronto
105 St George St
Toronto ON M5S 3E6
Canada
E-Mail: joshua.gans@gmail.com

Michael Waldman
Johnson Graduate School of Management
323 Sage Hall
Cornell University
Ithaca, NY  14853-6201
Tel: (607) 255-8631
Fax: (607) 254-4590
E-Mail: mw46@cornell.edu
AB  - This paper provides a new explanation for tying that is not based on any of the standard explanations -- efficiency, price discrimination, and exclusion. Our analysis shows how a monopolist sometimes has an incentive to tie a complementary good to its monopolized good in order to transfer profits from a rival producer of the complementary product to the monopolist. This occurs even when consumers -- who have the option to use the monopolist's complementary good -- do not use it. The tie is profitable because it alters the subsequent pricing game between the monopolist and the rival in a manner favorable to the monopolist. We show that this form of tying is socially inefficient, but interestingly can arise only when the tie is socially efficient in the absence of the rival producer. We relate this inefficient form of tying to several actual examples and explore its antitrust implications.
ER  -