Economides, Nicholas --- "Tying, Bundling, and Loyalty/Requirement Rebates" [2012] ELECD 218; in Elhauge, R. Einer (ed), "Research Handbook on the Economics of Antitrust Law" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on the Economics of Antitrust Law

Editor(s): Elhauge, R. Einer

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848440807

Section: Chapter 5

Section Title: Tying, Bundling, and Loyalty/Requirement Rebates

Author(s): Economides, Nicholas

Number of pages: 23

Extract:

5 Tying, bundling, and loyalty/requirement
rebates
Nicholas Economides*


I TYING AND BUNDLING: DEFINITIONS

Tying of two products (or services) occurs when a seller sells one good on the condition
that the buyer buys the other good from that seller:

A tying arrangement is `an agreement by a party to sell one product but only on the condition
that the buyer also purchase a different (or tied) product, or at least agrees that he will not
purchase that product from any other supplier.'1

Of particular interest are cases when the seller has market power in the tying product
(call it product A) which is the one required to be sold with the other (tied) product.
The tied product (call it product B) is the one that the buyer has to take to get the tying
product.
There are many different ways in which the sale of a product can be conditioned on
the sale of another. The tie that comes first to mind is the sale of two goods together in a
1:1 ratio or, more generally, in a fixed ratio. But there are also other more sophisticated
ways to condition tying. A tying condition may require a certain number of units of the
tied good to be bought from the same seller. An even more restrictive condition resulting
in a `requirements tie' is an agreement to sell the tying product only if the buyer buys all
or most of its requirements of the tied product from that ...