NET Institute Working Paper No. #10-26; Forthcoming in Einer Elhauge (ed.), Research Handbook on the Economics of Antitrust Law, Edward Elgar Publishing
I discuss the impact of tying, bundling, and loyalty/requirement rebates on consumer surplus in the affected markets. I show that the Chicago School Theory of a single monopoly surplus that justifies tying, bundling, and loyalty/requirement rebates on the basis of efficiency typically fails. Thus, tying, bundling, and loyalty/requirement rebates can be used to extract consumer surplus and enhance profit of firms with market power. I discuss the various setups when this occurs.
Date of Authorship for this Version
Economides, Nicholas, "Tying, Bundling, and Loyalty/Requirement Rebates" (2011). New York University Law and Economics Working Papers. Paper 251.