American Economic Review Vol. 116 No. 1 2026
Tying with Network Effects
Abstract
We develop a leverage theory of tying in markets with network effects. When a monopolist in one market cannot perfectly extract surplus from consumers, tying can be a mechanism through which unexploited consumer surplus is used as a demand-side leverage to create a “quasi-installed base” advantage in another market characterized by network effects. Our mechanism does not require any precommitment to tying; rather, tying emerges as a best response that lowers the quality of tied-market rivals. While tying can lead to exclusion of tied-market rivals, it can also expand use of the tying product, leading to ambiguous welfare effects.
- DOI
- 10.1257/aer.20240461
- Volume
- 116
- Issue
- 1
- Pages
- 332-374
- Language
- en
- Sources
- openalex crossref