Reference

Jay Pil Choi, Bruno Jullien, and Yassine Lefouili, Tying in Two-Sided Markets with Multi-Homing: Corrigendum and Comment, The Journal of Industrial Economics, 2017, forthcoming.

Abstract

We identify two issues in Choi's (2010) paper on tying in two-sided markets published in this Journal, and provide solutions to both of them. First, we point out that the equilibrium in the absence of tying requires more restrictive conditions and does not satisfy a natural equilibrium refinement criterion. We offer an alternative timing structure that validates the equilibrium derived in Choi (2010) under the conditions provided there. Second, we show that his equilibrium analysis with tying ignores a profitable deviation. We rectify this analysis under our alternative timing structure and derive the (mixed-strategy) equilibrium with tying. We also show by means of simulations that tying is welfare-enhancing whenever it is profitable, which is consistent with the main finding in Choi (2010).

Keywords

Tying; Two-Sided Markets; Multi-Homing;

JEL codes

  • D4: Market Structure and Pricing
  • L1: Market Structure, Firm Strategy, and Market Performance
  • L5: Regulation and Industrial Policy