Bundling and Tying

Nick Economides, NYU describes Bundling and Tying.

ABSTRACT: We discuss strategic ways that sellers can use tying and bundling with requirement conditions to extract consumer surplus. We analyze different types of tying and bundling creating (i) intra-product price discrimination; (ii) intra-consumer price discrimination; and (iii) inter-product price discrimination, and assess the antitrust liability that these practices may entail. We also discuss the impact on consumers and competition, as well as potential antitrust liability of bundling “incontestable” and “contestable” demand for the same good.