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3 - Bundling and Unbundling in New Technology Markets

Seven Easy Pieces: The Ideal Is the Enemy of the Efficient

Published online by Cambridge University Press:  05 June 2012

Stan J. Liebowitz
Affiliation:
University of Texas at Dallas
Stephen E. Margolis
Affiliation:
North Carolina State University
Geoffrey A. Manne
Affiliation:
International Center for Law and Economics (ICLE) and Lewis and Clark Law School
Joshua D. Wright
Affiliation:
George Mason University School of Law
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Summary

Bundling and tie-in sales are well-worked topics in both economics and law. Economists have largely answered the claim that tying the purchase of a monopolized good to a variable quantity of some other good does not readily provide the owner of the first monopoly with rents from a second monopoly. Only under very limited circumstances can a tie-in create a new monopoly. Beyond that, economists have hatched some clever theories that explain why firms might nevertheless engage in tie-in sales. Some of these explanations find that tie-ins can be socially harmless, harmful, or beneficial but nevertheless not monopolizing. Economists have also turned their attention to bundling. Most of these examinations try to explain conditions whereby bundles might increase profits.

In law, tie-in sales were made illegal under section 3 of the Clayton Act in instances where they would tend to create a monopoly. Since then, doctrines developed in case law now extend the provisions of the Sherman Act to tie-in sales, expanding awards and easing the burden of proof by making tie-in sales a per se violation of the law once certain threshold conditions are met. Tie-ins and bundles have also long been addressed by patent abuse doctrines, and most recently they are under attack under telecommunications regulation.

Type
Chapter
Information
Competition Policy and Patent Law under Uncertainty
Regulating Innovation
, pp. 77 - 119
Publisher: Cambridge University Press
Print publication year: 2011

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References

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