On Stability in Competition: Tying and Horizontal Product Differentiation

Egli, Alain (January 2005). On Stability in Competition: Tying and Horizontal Product Differentiation (Discussion Papers 05-01). Bern: Department of Economics

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We combine Hotelling’s model of product differentiation with tie-in sales. Tie-in sales condition the sale of one good upon the purchase of another good. In equilibrium firms choose zero product differentiation. Due to the tying structure no firm can gain the whole market by a
small price reduction. Then we address the following questions: Can a firm with monopoly power in one market leverage this power into another market where it faces competition. What is the effect from tying on the profits of the monopolist’s rival. In our model this effect is ambiguous.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Egli, Alain

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

Discussion Papers

Publisher:

Department of Economics

Language:

English

Submitter:

Lars Tschannen

Date Deposited:

21 Sep 2020 09:41

Last Modified:

21 Sep 2020 09:41

JEL Classification:

D43, L11, L12, L13

BORIS DOI:

10.7892/boris.145653

URI:

https://boris.unibe.ch/id/eprint/145653

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