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| Date: |
23 February , 2012 (Thursday) |
| Time : |
10:30am - 12:00noon |
| Language : |
English |
| Venue : |
Room 910, KKL Building, The University of Hong Kong |
| Presented By : |
Professor Kenneth S. Corts, Rotman School of Management, University of Toronto |
| Seminar title : |
How the source of the entrant's advantage limits entry-deterring tying
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| Abstract: |
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I revisit the simplest model of entry-deterring tying, Example 1 from Whinston's (1990) seminal paper, but allow the potential entrant to have either a cost advantage or a willingness-to-pay (WTP) advantage relative to the incumbent. I show that tying is more effective against an entrant with a cost advantage than an entrant with a WTP advantage since an entrant with a large WTP advantage may be able to induce the buyer to buy both the tied bundle and the entrant's product. I also show that tying but failing to deter entry is more costly when facing an entrant with a cost advantage than when facing an entrant with a WTP advantage. For a firm facing uncertainty about, for example, the entrant's entry costs, this makes tying a less attractive entry deterrent against a cost-advantaged entrant. These results shed light on the important policy question of which markets are most likely to be susceptible to entry-deterring tying.
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| All Interested are Welcomed |
| The paper will be available on request. |
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