Tying and Innovation: A Dynamic Analysis of Tying Arrangements* By

Abstract

This paper analyzes the effects of tying arrangements on R&D incentives. It shows that tying is a means through which a firm can commit to more aggressive R&D investment in the tied goods market. Tying also has the strategic effect of reducing rivals’ incentives to invest in R&D. The strategy of tying is a profitable one if the gains, via an increased share of dynamic rents in the tied goods market, exceed the losses that result from intensified price competition in the market. The welfare implications of tying, and consequently the appropriate antitrust policy, are discussed. . JEL Classification: L13, L41, O31.

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Cite this paper

@inproceedings{Choi2002TyingAI, title={Tying and Innovation: A Dynamic Analysis of Tying Arrangements* By}, author={Jay Pil Choi and Kyle Bagwell and Prajit K. Dutta and Bhaven N. Sampat and Michael Whinston and Sang-Seung Yi and David de Meza and Joel I. Klein}, year={2002} }