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The Leverage Theory of Tying Revisited: Evidence from Newspaper Advertising

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  • Margaret E. Slade

Abstract

Data from the Canadian newspaper‐advertising industry is used to assess the private profitability of tying in a market where the standard efficiency motives (e.g., price discrimination, cost saving, and quality control) are unlikely to apply. The empirical assessment is based on a model of leveraging in which suppliers of the tied good are paid a commission rather than a fee for service. This model demonstrates that tying is profitable under a wide range of circumstances. Furthermore, it is found that, with newspapers, tying and monopoly power go hand in hand.

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  • Margaret E. Slade, 1998. "The Leverage Theory of Tying Revisited: Evidence from Newspaper Advertising," Southern Economic Journal, John Wiley & Sons, vol. 65(2), pages 204-222, October.
    • Handle: RePEc:wly:soecon:v:65:y:1998:i:2:p:204-222
    DOI: 10.1002/j.2325-8012.1998.tb00146.x
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