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Anti-competitiveness of Instant Messenger Tying by Microsoft

Author

Listed:
  • Kim, Jaehong
  • Bang, Se Hoon
  • Hwang, Sunjoo

Abstract

In this paper, we theoretically analyze Microsoft's tying practice in the instant messenger market. Using a model that highlights distinct features of the instant messenger, which are different from the cases of the web browser and the media player, we show that Microsoft can leverage its monopoly power in the operating system (OS) market to the instant messenger market through tying strategy. Microsoft's messenger tying hurts consumers because it enables Microsoft to monopolize messenger market and so fully exploit consumer's willingness to pay to the OS-messenger bundle. However, since tying saves installing costs, consumer loss is not so serious that total surplus improves under messenger tying. Finally we show that such results are robust to the possibilities of multi-homing in the instant messenger market.

Suggested Citation

  • Kim, Jaehong & Bang, Se Hoon & Hwang, Sunjoo, 2011. "Anti-competitiveness of Instant Messenger Tying by Microsoft," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 52(2), pages 185-198, December.
    • Handle: RePEc:hit:hitjec:v:52:y:2011:i:2:p:185-198
    DOI: 10.15057/22027
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    References listed on IDEAS

    as
    1. Dennis W. Carlton & Michael Waldman, 2002. "The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 194-220, Summer.
    2. Schmalensee, Richard, 1982. "Commodity Bundling by Single-Product Monopolies," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 67-71, April.
    3. Whinston, Michael D, 1990. "Tying, Foreclosure, and Exclusion," American Economic Review, American Economic Association, vol. 80(4), pages 837-859, September.
    4. Blair, Roger D & Kaserman, David L, 1978. "Vertical Integration, Tying, and Antitrust Policy," American Economic Review, American Economic Association, vol. 68(3), pages 397-402, June.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Xu, Jun, 2013. "A two-sided market model of optimal price structure for instant messenger," MPRA Paper 62960, University Library of Munich, Germany.

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    More about this item

    Keywords

    Microsoft; instant messenger; tying; foreclosure; multi-homing;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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