On Holders, Blades and Other Tie-In Sales

Egli, Alain (July 2004). On Holders, Blades and Other Tie-In Sales (Discussion Papers 04-17). Bern: Department of Economics

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Tie-in sales have a bad image because of anti-competitive effects. Notably, tying contracts allow monopolists to carry over monopoly power into markets where they meet competition. Most of the literature assumes a firm being monopolist in one market and facing competition in another. In contrast, we analyze two firms which both are monopolists in one market and competitors in the other. Under such a symmetric structure tying has competitive effects. Tie-in sales may increase the consumers’ expected utility. By tying their products, the firms insure consumers against uncertain future demand.

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