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- Title
TIE-IN SALES AND PRICE DISCRIMINATION.
- Authors
Liebowitz, S. J.
- Abstract
This paper analyzes a class of contracts between buyers and sellers which specifies that the purchase of one good cannot be effectuated unless a second good is also purchased. The economic forces resulting from a tie-in are shown to be influenced by factors such as depreciation of the tying good, the sales policy of the firm and the discount rate. Price discrimination, the traditional hypothesis for this tie-in, is seen to make sense only when these factors align themselves in particular ways although an alternative hypothesis, risk reduction, is unaffected by these factors. The price-discrimination hypothesis, therefore, loses much of its appeal, relative to the alternative.
- Subjects
PRICE discrimination; CONTRACTS; DEPRECIATION; PURCHASING
- Publication
Economic Inquiry, 1983, Vol 21, Issue 3, p387
- ISSN
0095-2583
- Publication type
Article
- DOI
10.1111/j.1465-7295.1983.tb00640.x