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Tying and Innovation: A Dynamic Analysis of Tying Arrangements

Jay Pil Choi

Title:
Tying and Innovation: A Dynamic Analysis of Tying Arrangements
Author(s):
Choi, Jay Pil
Date:
Type:
Working papers
Department:
Economics
Permanent URL:
Series:
Department of Economics Discussion Papers
Part Number:
9798-15
Publisher:
Department of Economics, Columbia University
Publisher Location:
New York
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 shown to depend on the nature of R&D competition.
Subject(s):
Economic theory
Item views:
156
Metadata:
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