Social and Behavioral Sciences Commons^™

Tying Arrangements And Lawful Alternatives: Transaction Costs Considerations, Herbert J. Hovenkamp

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Tying arrangements often increase welfare by promoting product quality and protecting the supplier's goodwill in the tying product. When the tying product works effectively only with ancillary materials or accessories or services of a particular kind or quality, its supplier can assure the requisite quality of the ancillary product only by supplying that product itself. The cost savings defense and the defenses of quality control or good will are the most widely recognized and accepted tying defenses.

One characteristic of manufactured products is differentiation among the offerings of various brands. This in turn produces a need for more specialized provision …

Tying Noncompetitive Goods, Herbert J. Hovenkamp

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Many of the classic tying cases involved tied products that were common staples such as button fasteners, canned ink, dry ice, or salt. These products were sold in competitive markets, presumably at prices very close to cost. For most of them the most likely explanations for the tie were quality control or price discrimination, both with competitively benign results in the great majority of situations. When the tied good is sold in a noncompetitive market, however, an additional consumer welfare enhancing result is likely to obtain – namely, the elimination of double marginalization, which occurs when separate sellers of complementary …

Tying And The Rule Of Reason: Understanding Leverage, Foreclosure, And Price Discrimination, Herbert J. Hovenkamp

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Many tying arrangements are used by firms that do not have substantial market power in either of the two markets linked together by the tie. Their function must be something other than the enlargement or perpetuation of power. A few ties do involve fairly explicit exercises of market power, but they need not be used for a different purpose than the ties imposed by more competitive firms. This paper considers firms’ use of ties to exploit whatever power they already have over the tying product. The "leverage" theory sees ties as exploiting customers as a group via higher prices, whether …